Welcome to the next sweet spot: Indonesia

Indonesia could be as sweet as Vietnam for many investors in the near future if all the stimulus packages aimed at providing a better investment climate are smoothly implemented.
Korean Chamber of Commerce and Industry in Indonesia (Kocham) chairman CK Song said on Tuesday that Indonesia was already on the right track for becoming as competitive as Vietnam in attracting foreign investment, but that it would take time for Southeast Asia’s largest economy to fix numerous problems.
“I have a very strong positive feeling about future Indonesia. Even now it’s quite difficult, but I think they’ll get over the situation very quickly,” he said on the sidelines of Kocham’s 2016 business dialogue.
Everyone now wants to go to Vietnam because it started providing incentives for foreign investors earlier, treating them like kings, he said.
Vietnam is a sweetheart for most investors willing to invest in Southeast Asia, ranked 90th in the 2016 World Bank’s ease-of-doing-business index.
Foreign direct investment (FDI) flowing into the country of 90 million people hit a record high of US$14.5 billion last year. Indonesia recorded a higher FDI of Rp 365.9 trillion ($27.3 billion), but it was ranked 109th in the index due to an unfavorable investment climate.
Recognizing the weakness, President Joko “Jokowi” Widodo has launched 10 economic stimulus packages over the last six months to boost investment and the business climate in the Southeast Asia’s economic giant.
Song emphasized that communications and synergy among ministries would be the key to implementing all the stimulus packages.
Both the Indonesian Chamber of Commerce and Industry (Kadin) and the Indonesian Employers Association (Apindo) have lauded all the packages and expressed an expectation that they will be well-implemented and create jobs for many.

The stimulus packages address many different things, ranging from licensing procedures to the “negative investment list” (DNI), which covers sectors in which restrictions on foreign investment apply.
“The purpose of deregulation is not liberalization but modernization. We need to analyze how developed countries achieve their success [...],” said Trade Minister Thomas Lembong in his opening speech at the event.

He said in front of dozens Korean business players attending the event that Indonesia was among the countries with the least number of trade agreements, and it aimed to increase its number to gain greater market access.
Having joined the ASEAN Community, Indonesia is now in the process of resuming talks on the Indonesia-European Union (EU) comprehensive economic partnership agreement (CEPA) and is reviewing benefits and drawbacks of joining the US-led Trans Pacific Partnership.
The TPP is expected to expand the country’s market access to the 12 Pacific Rim countries also in the partnership.
South Korean Ambassador to Indonesia, Choi Tai Young, said that many Korean businesses were now also looking at whether Indonesia would eventually join the TPP.

Korean FDI to Indonesia increased by 8 percent year-on-year to $1.2 billion last year, while its investment through other countries or through joint-ventures with other countries surged by 26 percent to $1.6 billion, according to data from the Investment Coordinating Board (BKPM).

Khoirul Amin, The Jakarta Post, Jakarta | Business | Wed, February 24 2016, 9:09 AM



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