For Spring Break I was lucky enough to travel to Indonesia with Chazen. It was an incredible adventure and one of the highlights of my time at CBS so far. I learned far more on the company visits than I anticipated, discovered a whole new culture and made close friends in only a week. Our trip was uniquely structured in that we started out with the first of three days of company and government visits in Jakarta prior to cultural immersion in Bali. Bali was awesome—Hindu temples, pork feasts, Monkey forests, massages, demon parades, a jungle lodge and the Balinese New Year!—but I’ll focus primarily on our time in Jakarta to give you a taste of the Chazen experience.
On Sunday, I arrived at the Jakarta airport, and transferred to meet the group. We are staying at the Mandarin Oriental Hotel, which is so amazing and luxurious. I was excited to meet all the people—we were 21 people in total: about an equal split of 1st years and 2nd years. We met up at the mall briefly to get some “formal” batik wear since you can wear them to meetings in lieu of a suit. After that we headed out to dinner at an old mansion; we had a private room and an amazing dinner with a ton of little tastes of lots of Indonesian traditional dishes.
Our first day was incredibly varied: we visited an elementary school, then made the shift to the largest private equity firm, Saratoga Capital. At Saratoga, we spoke with the CEO and founder, who was extremely open and very responsive to all our questions. He and his team talked about investing in Indonesia and then walked through their portfolio companies, and we could jump in with questions whenever we wanted. He was optimistic while still being realistic, and I really enjoyed the mix of investment-specific commentary while still tying in the macro factors that affect investing in Indonesian companies in general. The final meeting of the day was actually in a batik store in an upscale mall with another private equity firm owner. This store is like the Dior of batik, and he invested in it when it was facing bankruptcy, so we were having this discussion in the atelier—some rich women even came in during the presentation to look around with a personal shopper! Their investment thesis is finding mid-tier consumer businesses, banking on a rising consumer class.
On day two, we met with the Governor of Jakarta (more on that later). Next we met a man who works at the Lippo Group, a major conglomerate in Indonesia. Although they impact quite a few verticals, this guy was the grandson of the founder and was working on establishing an e-commerce company to complement the Group’s retail presence. We finished the day speaking with Investor Relations at Mandiri, the country’s largest bank.
Wednesday was the final day of company visits. We started at Astra International, Indonesia’s largest public company by market cap. They primarily specialize in auto, and have exclusive rights to manufacture and distribute several Japanese brands, most notably Toyota. Given the big role of cars and motorcycles (700k additional cars come into Jakarta daily!) this is obviously a crucial sector. From there we drove to meet the Minister of Finance, which if you think about the American equivalent of getting 1.5 hours with the Treasury Secretary, is pretty amazing. We sat around a long table (and I took a pic in his seat before the meeting started!) and he gave us an overview of his thoughts on the macro economy, and then we asked questions. He had a couple of primary concerns: First, the sorry state of entrepreneurship. He wants more Indonesians to start their own companies and isn’t pleased with how few do. The minister also talked a lot about increasing tax compliance: out of 250M people, only about 25M actually pay taxes, and he estimates that only 10M of those are truly compliant. There’s a goal to increase tax revenues by 30%, not by increasing rates but simply by bringing in what’s “technically” due. It’s an ambitious goal, but entirely necessary if the government wants to carry out the much-needed public works. The final visit of the day was to Kaskus, Indonesia’s largest website. It’s a bit like Reddit, MeetUp and Craig’s List combined.
My favorite meetings were with Saratoga and the Governor. The Governor was extremely candid and open about everything (we walked through his bedroom!), and what he does has a lot of influence over the country’s development since he controls the population center and business center of Indonesia. In this discussion and in all meetings overall, there are a few issues that come up over and over again and are all interconnected in a very complicated way:
- Infrastructure: this to me feels like the biggest impediment to getting business done. Most evidently, the traffic in Jakarta is crazy. The streets don’t make sense—you have to travel quite a bit in one direction to turn around to get to the other side of the street. We wanted to go to dinner across the street from the hotel and had to take a 25 minute taxi to get there—you can’t walk and we had to drive down a main street in bumper to bumper traffic just to turn around. There are buses, but they aren’t very good and in any case, they are slow. There’s interest in mass transit, but that will take time and major investment. And this is just in the main city. Apparently it takes less time to ship things from Jakarta to Singapore or HK than to another neighboring island because ports, etc. are underdeveloped. In talks with e-commerce players, for example, I don’t know how you develop a business when you can’t ship things to customers.
- But to pay for this, you need government revenue, and there’s not enough taxes coming in. So you need up enforcement, but that also requires a strong tax base. But…
- Healthcare and education are also quite poor, and if you are uneducated or sick, you can’t really work and earn money to pay
- And on top of all this, business and government are notoriously corrupt, so maybe you do all this work to get more money into state coffers but then it’s misused or you try to educate your workforce and they can’t get jobs because they go to the most connected people
Although we only had our visits over three days (usually there are fewer per day but they are spread out over the week, whereas ours were concentrated and front loaded), I feel like we met such a diverse group of people and I learned a TON. I am really impressed with the experience and the business aspect really surpassed my expectations. I’m also impressed with my peers on this trip and how professional and engaged everyone has been. During the meetings people asked really penetrating questions and then once we went on the bus again a lot of those conversations and debates continued. It’s not at all a group that is just here to use the visits as an excuse to travel but rather real intellectual curiosity. That’s not to say that people aren’t funny and out to have a good time, because that’s true too, but it’s just been more rewarding than I thought, and a special CBS experience that feels like something you could only do in business school.
By Clare Premo ’16