The World Bank last week took Indonesia's 2013 growth forecast down a notch for the second time this year. But the economy is still set to expand 5.9% from earlier estimates of 6.2%.
The easing of growth momentum is unlikely to slow the country's trajectory too much, however, with expectations that it is on track to become one of the 15 largest economies in the world within the next decade, according to recent research by Boston Consulting Group (BCG).
Silver lining has a big black cloud
BCG notes, however, that many companies may be left behind due to the country's labour market policies. "They may need to scale back their growth plans unless they can recruit, develop, and retain the right people. This should be a top priority for chief executives in Indonesia."
And with more than 120 banks operating in Indonesia, the recruitment of enough staff to meet the demands of a rapidly growing growing economy, and the burgeoning middle class and affluent population will be a challenge. BCG believes that by 2020, 140 million Indonesians, out of a total population of over 300 million, will fall into this consumer segment.
Not enough talent
Melvin Teo, country head of DBS Indonesia, says there is significant room for the financial services sector to grow to meet the expected demand from newly affluent consumers. But he agrees with BCG that challenge will be finding sufficient numbers of suitably qualified bankers to support expansion.
"There is stiff competition for talent from local, regional and global banks, which has been exacerbated by the fact that insufficient numbers of Indonesian banking graduates are coming out of too-few educational institutions."
Benefits are core to employing and keeping the right people, say Teo. Unlike in many other countries in Asia, banks will still pay relocation and expat packages. Tricia Liverpool, MD of Morgan McKinley in Singapore, says that for foreigners, there are many benefits to working in Indonesia. "Expat packages are still granted more readily given they do not cost as much as elsewhere in the region."
Nicholas Neal, country manager of recruitment firm Robert Walters' Indonesia office says, however, that relocation packages are only offered to returning Indonesian nationals.
Despite robust growth prospects, it hasn't been plain sailing for the banks. Neal says several foreign retail banks entered the market with aggressive expansion plans, but could not compete due to low profitability.
"They had to close down and exit the market. But those banks that stayed focused on wholesale banking - offering treasury and trade finance products to big corporations and other institutional clients - and commercial banking to small and medium enterprises have been more stable."
It isn't just banks that are benefiting from the rising affluence of Indonesia's huge population. Neal says insurance and multi-finance companies are also growing on the back of the emerging middle class and its rising disposable income. "This is leading to higher insurance penetration levels."
Only a dim light at the end of the tunnel for foreign job seekers
With the investment banking sector dominated by Indonesian-owned banks, foreign banks have historically maintained a relatively small presence, but Neal says this is changing. "We're starting to see expansion as well as changes to legislation, which in turn is fuelling growth. But demand for front office roles is still small, being tied to transactional opportunities, and this has a knock-on effect on middle and back office hiring."
While finance workers may see Indonesia as a route to jobs and packages that still pay all the perks, Neal points out the quotas in the banking system mean that opportunities for foreigners are limited. And as things stand currently, Indonesian companies are required to replace foreigners with nationals within a defined time period.
"Foreigners generally occupy senior roles such as president, MD, GM, CEO and CFO positions. As such, the population of expats is small and we think it will continue to decline over time."