Hatfield Consultants Partnership, a resource-management firm based in North Vancouver, B.C., is doing work in resource-rich Indonesia.
Resource-rich Indonesia, a magnet for global mining and energy companies, has been working to raise its environmental standards. That has meant opportunities for Hatfield Consultants Partnership, a resource-management firm based in North Vancouver, B.C., that can tell whether a proposed mine might encroach on the endangered Sumatran tiger or how to lessen exploration's impact on monkeys, butterflies and fish.
The company, which has a 35-person office in Bogor, West Java, is in many ways an exemplary model for Canadian firms in emerging markets. It has worked to create a respected presence on the ground, and it has adapted management expertise and sophisticated technology for use in the developing world. From Radarsat-1, for instance, designed by the Canadian Space Agency for Arctic surveillance, it created a system for monitoring tailings deposition from a giant copper and gold mine in West Papua.
"There are big opportunities," says Hatfield president Grant Bruce. "But it doesn't happen overnight. You've got to do your homework and you've got to be committed. You have to find a good Indonesian partner, somebody you can trust and work with. You've got to be persistent."
Big players such as Manulife Financial Corp., Sun Life Financial Inc., Vale Ltd. (formerly Inco Ltd.), Bombardier Inc. and BlackBerry Ltd. are firmly established in Indonesia. Now it is time for smaller companies to explore this rich terrain, experts say.
"Indonesia has in my view the perfect ingredients for Canadian companies," says Peter Dawes, a Toronto consultant and head of the Canada-Indonesia Business Council. "It is friendly, relatively easy to get to and it needs just about everything we're good at – education services, medical services and all sorts of the different technologies that we have. We're welcome there, and we always have been."
One thing going for Indonesia is sheer size. Its 252 million people make it the fourth most populous country in the world. It emerged from the 2008 financial crisis relatively unscathed and is poised for GDP growth of around 5.5 per cent for 2014.
It has a strong emerging middle class. According to the IMF, nominal GDP per capita was $3,509 (U.S.) in 2013. While this is low by Western standards, it is relatively healthy compared with other regional economies, and most importantly, it is growing fast. Indonesia's demographics are also promising, with a median age of around 28 years.
These numbers translate into increased consumption and should mean more opportunity for Canadian exporters.
Indonesia imports about $1.9-billion worth of Canadian merchandise a year, a figure that has doubled in the past five years, according to Export Development Canada. More than $900-million of that was supported by EDC in 2013 through loans to buyers or receivables insurance, making Indonesia the third biggest place for the Crown corporation's capital deployment in Asia, after India and China.
"Indonesia is an exciting place," says Peter Nesbitt, the EDC's regional vice-president for Asia, based in Singapore. "It's huge and it's the third largest democracy in the world." Mr. Nesbitt is particularly encouraged by Indonesia's key role in the 10-country effort to create an Asian economic community, intended to reduce trade barriers, create common investment rules and encourage the free movement of labour.
"It will create easier access for Canadian companies in Thailand, for example, to do the same things in Indonesia and Malaysia," Mr. Nesbitt said. Ottawa's recent announcement of a new ambassador to the Association of Southeast Asian Nations (ASEAN) shows the government is serious about supporting Canadian businesses in the region, he adds.
Of course, there are challenges, and they are not insignificant. Indonesia's new president, Joko Widodo, is a young, self-made businessman who seems open to foreign investment. But at the same time, the recent election stirred up nationalist sentiment that resulted in a dispute over an export tax on raw minerals, leading to a hiatus in exports by two major U.S. mining companies. While this conflict is being resolved, reverberations will be felt. And the verdict is still out on how Mr. Widodo will manage protectionist sentiment.
Meanwhile, the new president vows to end the endemic corruption that has made some investors wary. Mr. Widodo, an outsider with populist appeal who represents a break from the entrenched bureaucracy and insular power structure, says he wants to clean things up, but he is expected to face resistance.
"Corruption tends to be cultural," says Stewart Beck, president and CEO of the Asia Pacific Foundation, based in Vancouver. "If you have leadership committed to ending corruption, that's the first step. But it's going to take time."
Another challenge for Canadian business abroad is the relatively high cost of our goods and services. We are often underbid for lucrative contracts by firms in Korea and China. While Canada has a reputation for high quality, Mr. Beck questions a cost structure that may not be competitive in emerging economies. Companies should be asking: "Does it have to be top of the line to meet the demands of the market?"
Another bit of advice Mr. Beck has for smaller companies is to ride the coattails of bigger, more established corporations.
That strategy is working for Peterborough, Ont.-based Flying Colours Corp., an aviation services company that recently converted two Bombardier regional jets into business jets for an Indonesian corporation. The company is a key player in a regional service centre that Bombardier is setting up in Singapore.
"The whole Asia Pacific market is taking off," says the company's president, Eric Gillespie, noting that with more than 13,000 islands to navigate, Indonesians have a particularly big need for aircraft. "We are already seeing an increased demand for our services."