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Foreign Direct Investment and Indonesia’s Opportunity

Foreign Direct Investment and Indonesia's Opportunity

Old ways won’t open new doors. It’s an adage that goes back donkey’s years. So far back, in fact, even the all-seeing eye of Google has a real hard time attributing it to anyone in particular.

But you get the gist, right? If you keep doing the same old thing nothing’s going to change.

That’s something Jokowi’s administration seems to have taken on board with particular reference to Indonesia’s efforts to attract more Foreign Direct Investment (FDI) and making it easier to do business here.

Omnibus Laws, deregulation, infrastructure development, land ownership revisions, tax cuts, Special Economic Zones (SEZs), revision of the Negative Investment List (NIL) to the Positive Investment List (PIL), credit rating improvements and a slew of financial reforms and stimulus packages have all opened new doors and should all have a positive effect in attracting FDI.

Seven Stones Indonesia

That’s why we’re delivering smart, collaborative, relevant, and progressive investment and business solutions that have a positive impact on clients, partners, employees, and local communities. At SEVEN STONES INDONESIA we’re focusing on what matters most to our networks today as well as future-proofing them so doing business in Indonesia is more relevant, efficient and effective.

But is the attention on FDI all too little, too late?

There have been a number of reports recently in both the local and international press around companies relocating from China. Some have argued they seem to have avoided Indonesia, preferring instead to invest in Vietnam, Thailand, Malaysia, Taiwan, and India.

Some would also argue this is for good reason. It’s just easier. There’s less red tape. Less corruption. And it’s cheaper! Naysayers may whinge that Indonesia’s ease of doing business environment is still in the Stone Age and will never change. But we’d argue “you’ve gotta start somewhere” because that signals the intention to change.

We have to plant trees under whose shade we don’t expect to sit.

A Journey of a Thousand Miles Begins with a Single Step

And that’s the point because while the journey may well be a long one, the fact is you have to actually make the decision to start, which Jokowi’s administration has done. The result? New doors are beginning to open and opportunities are beginning to present themselves.

Ladies and gentlemen… the train has definitely left the station!

According to The Nikkei Asian Review Jokowi has declared Indonesia open for business, quoting him as saying:

“we want companies from China, of course, but also Japan, South Korea, Taiwan, the U.S., and anywhere else in the world to move here. If other countries are asking one-million for land, then we can offer it for 500,000,” Widodo said.

The Potential of Industrial Parks

The President said this at a recent unveiling of a new industrial park in Batang, on the north coast of Central Java about 100-kilometres west of the provincial capital of Semarang, where seven foreign companies have committed to relocate and start construction of their facilities to the tune of USD 850 million.

The Jakarta Globe also reported the “largest economy in Southeast Asia has also received a commitment from at least 17-companies to relocate to the industrial area, with total investments estimated at USD 37 billion.” The Jakarta Post believes this will create employment for more than 110,000 people.

Indonesia plans to set up 19 industrial parks across the country by 2024. IDN Financials are reporting at least 143 companies, mostly from the United States, will relocate their investment to Indonesia.

Director of Promotion Development at Indonesia’s Investment Coordinating Board (BKPM), Alma Karma, explained that out of the 143 companies, 57 were from the US, 39 from Taiwan, 25 from South Korea, and the rest are Japanese and Hong Kong companies.

Why do foreign companies relocate?

The consensus on why companies are relocating seems to narrow down to these key reasons; increasing labour costs; increasing tariffs and taxes resulting from the US-China Trade War (which impact many other countries apart from the US and China); and concerns over the coronavirus and the impact this is having on supply chains.

The South China Morning Post is reporting that “a spokesperson for the US International Development Finance Corporation (DFC), said Indonesia’s strong and growing domestic economy make it an attractive investment market.”

The report goes on to quote Alexander Feldman, chairman of the US-ASEAN Business Council, as believing “the advantages that Indonesia can offer as a manufacturing hub are particularly around its large domestic consumer market. Indonesia is expected to be one of the world’s fastest-growing emerging markets over the next decade, offering revenue growth opportunities for a wide range of multinationals across many sectors of manufacturing and services. Indonesia does have the additional advantages of relatively low-cost manufacturing wages and a large labour force, for firms looking to manufacture for the Indonesian domestic consumer market,” he said.

Nordic Council Indonesia

For the savvy investor now could be an ideal time to consider relocating and investing in Indonesia, despite the current global economic maelstrom, especially if there is the attention given to the greater good.

A case in point is the recent formation of the Nordic Council Indonesia (NCI), a collaborative group of professionals working with both foreign and domestic partners to encourage innovative business and social investment that have a positive impact on Indonesia.

NCI is the bridge connecting Nordic investments, innovation and expertise with Indonesia’s potential and resources by providing access to both business and government networks including those that inspire eco-conscious, community, and educational development.

Terje Nilsen, Chairman of the Board for NCI told SEVEN STONES INDONESIA that “one of our main motivations to start up NCI is to be able to support and, of course also benefit from, the potentials that now emerge in Indonesia through the various steps taken and implemented by Jokowi.

The COVID-19 situation has also created further urgency into it all, and we are all excited to support and grow activities between Indonesia and our fellow Nordic Countries.”

The Future is ours to Create

It seems mindset is the key and the future is ours to create. If we stay set in our old ways and take the naysayers and doomsday prophets at their word we risk standing still and stagnating, confused and frustrated as to why new doors remain closed and why possibilities are confined to dreams.

If we want to be the change we want to see, if we want to prosper (as businesses and societies) we must cultivate and embrace ideas and initiatives that have positive impacts for us all. It is with this mindset that companies, and even countries, can open new doors and truly make a difference.

SEVEN STONES INDONESIA is headquartered in Bali and specialises in residential and commercial property sales and rentals both in Bali and neighbouring islands. We provide legal, marketing and fund management services and cover a wide range of investment opportunities from off-plan developments to infrastructure projects.

We are a customer-centric company that believes in authentic engagement to deliver lifetime value to and for all stakeholders with the aim of boosting business, brand growth and prosperity for clients and partners alike.

Find out how we can help you and your business. Send an email to [email protected].

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