A farmer works in a paddy field in Subang, Indonesia's West Java province on January 20, 2011.BEAWIHARTA/Reuters
Manulife Financial Corp. needs Indonesia to say its name.
Being recognized by brand is a key part of the insurer's plan to reach new consumers in the country as its GDP rises and incomes and purchasing power of residents follow. Nearly thirty years after it first entered the marketplace, Manulife is pouring the pressure on its various sales channels to make its Indonesia business a significant contributor to the insurer's earnings targets within five years.
"It's critical for us to establish those relationships with that middle-class, emerging, bankable population, because that means that when they look to save for their kids' education, or retirement, that they have that relationship already," said Jakarta-based Chris Bendl, chief executive of Manulife Indonesia, in an interview during his annual trip back to Canada.
Manulife has set ambitious targets to reach $4-billion in core earnings by 2016, and building its business in the world's fourth most populous country could contribute to this goal in a significant way (although Mr. Bendl won't name a figure). The company called Indonesia an "increasingly important contributor to Asia Division's overall results," and last year wealth sales exceeded the $1-billion (U.S.) mark.
Indonesia's consuming class of people could grow by 90 million people before the year 2030, McKinsey & Co. research recently found, which should provide many new clients for financial service companies such as insurers. But Manulife must correctly position itself to capture that rise, using its new bank partners and other distribution channels to reach out through the archipelago of more than 17,000 islands.
Mr. Bendl first went to Indonesia with $250,000 to set up the asset management business as the Suharto dictatorship was ending in 1997. Today, Indonesia is a democratic country and that unit makes "a multiple 100 times that figure in profits," he said. Brand recognition is improving, and Indonesians buy more mutual funds from Manulife than any other outlet. The company is also ranked in the top five in individual insurance.
But Indonesia is a competitive market, and like many other Asian countries its economic growth has slowed somewhat in the course of the last year. "The slowdown in China does impact places like Indonesia because it is, like Canada, very rich in resources. So the Chinese are big importers of coal, wood and other specialized commodities like palm oil," Mr. Bendl said. But, one of the big reasons he has confidence in Indonesia's continued stability is that "almost 70 per cent of GDP is domestic consumption. It's not a country that is reliant on exports."
The insurer partnered with PT Bank Danamon Indonesia Tbk last year to increase sales through its network of bank branches. It has also retooled its product lineup, and recently introduced an approximately $10-per-month micro-insurance product that provides a basic level of protection to Indonesians with limited incomes-- insurance offerings like these make it easier to gain customer's who are just beginning to build their wealth.
Sourcing young employees has also become more important, and Manulife has put in place new programs that partner with Indonesian universities and their math faculties to find and develop raw actuarial talent.
Mr. Bendl says other Canadian companies "should be bolder," and consider doing more business in the region in the coming years as urbanization booms and incomes increase. "Typical Canadians might remember Bre-X, and people falling out of helicopters and being eaten by wild pigs... but Indonesia has moved beyond that. People ought to look more closely into this market."
(Jacqueline Nelson is a Globe and Mail Financial Services Reporter.)
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