International Enterprise (IE) Singapore is optimistic about the long-term investment prospects of Indonesia business because of new policies implemented by Indonesian President Joko Widodo’s administration to reduce barriers for foreign firms.

IE, a government sponsored agency aimed at promoting investment, urged more Singaporean businesses to expand into Indonesia to take advantage of lower labor costs, a large consumer base, and further integration that the ASEAN Economic Community (AEC) will bring.

At a seminar about business opportunities in Indonesia’s infrastructure sector, representatives from IE Singapore explained that there are three main areas for growth: port and maritime projects, manufacturing, and public utilities.

“As Indonesia builds up its infrastructure in the coming years, there will be opportunities for Singapore companies of all sizes to participate in this growth,” said Ivan Tan, director of IE Singapore.

The agency said that there have been many improvements in the Indonesia business climate and the country’s attractiveness to foreign investors since Widodo, more casually referred to as Jokowi, was elected president last year.

For example, the Indonesia Investment Coordinating Board has put forth several measures to attract foreign capital, including a one-stop service to hasten permit and licensing procedures, in an attempt to solve the problem of delays caused by red tape and poor processing methods.

 

Indonesia Business Luring in FDI from Singapore

Businesses in Singapore that have expanded into Indonesia said that before, it took as long as three months for authorities to process business applications. Since January, these applications have taken only one to two weeks.

“There have been major administrative improvements … there is less red tape,” said Lilian Tan, director of Singaporean supply chain management company YCH Group, which has done business in Indonesia for a decade.

Indonesia’s new government has set an annual growth target of 7% by 2018. In 2014, the country’s economic growth was 5.1%, down from 5.8% in 2013 and 6.3% in 2012.

Dr. Andri Hadi, Indonesia’s Ambassador to Singapore, attended the seminar. He believes that the two nations have complimentary traits and are a natural fit for each other.

“Singapore companies have the knowledge and latest technology, while Indonesia has the human resource and land … This is a good opportunity for both economies to grow,” explained the ambassador.

Indonesia has been Singapore’s second-largest trading partner among the Association of Southeast Asian Nations (ASEAN) since 2012. Singapore has also been Indonesia’s top foreign investor since 2009, except for 2013 when Japan overtook its position for a short period.

Foreign direct investment (FDI) from all countries in Indonesia hit US$23.7 billion (S$31.3 billion) in 2014, with Singapore contributing US$5.8 billion to the total.

There is plenty of evidence that Indonesia’s ease of doing business has been drawing in more foreign capital. Theron Madhavan, CEO of Flagship Ecosystems, an eco-friendly technology firm which has operated in Indonesia since 2007, plans to use the country’s improved business climate to expand.

“With the better administrative measures … we have plans to expand our business portfolio there and take on more projects,” said Madhavan.

About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's experienced with trading stocks and buying property in Thailand, Cambodia, and elsewhere. He's been featured in publications such as Forbes, Nomad Capitalist, Property Report, and Seeking Alpha. Download his free investment guide by clicking here.

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