PPPI’s Research Team:
UNLOCKING THE DOOR – A Brief Summary
Indonesia is frequently seen as the country of what will be. It has enormous – and still largely untapped – potential with a huge and growing domestic market, a youthful workforce and an abundance of natural resources that make it appear to investors as one of the last great places for global expansion. Virtually every major American corporate brand name has sought a presence in Indonesia in recent years. From consumer goods producers to fast-food outlets, entertainment giants to technology and e-commerce players, many big international companies see being in Indonesia as a strategic necessity. Less visibly, venture capital firms and financial service providers find Indonesia a lucrative destination where the future seems almost limitless.
As American companies seek expansion and new horizons in Indonesia, they join forces with established US energy and mining companies that have built vast industries here employing tens of thousands of Indonesians over several decades. In the process, they have provided a large chunk of government revenues. For all these companies, big and small, newcomers or veterans, Indonesia is a partner in their business future just as they are partners in Indonesia’s growth and development. It is with that in mind that we engage with the government of Indonesia to promote a more vibrant investment climate and greater communication between US businesses, government policymakers and the people of Indonesia.
We are on a mutual search with Indonesian policymakers and the private sector to find the right combination of policies and incentives that will allow investors to feel confident and welcome and will provide the government with the employment, revenues and growth it needs to succeed long into the future. This report, along with our other advocacy and engagement efforts, is our way of trying to unlock the door to progress.
A joint AmCham Indonesia-U.S. Chamber of Commerce study in 2013 concluded that American companies had invested $65 billion in Indonesia over the previous eight years, making the US likely the country’s largest source of foreign direct investment during a period of intensive growth. The same survey found that $61 billion was poised to come into the country given a conducive investment climate. Much of that investment – like Indonesia’s own vast potential – remains in limbo, waiting for the time to be right.
As friends and partners in Indonesia’s progress, we share the concerns expressed by senior government officials about overly complex regulations that can stunt economic growth and blunt Indonesia’s competitive edge in the race to attract the kind of investment that will make the difference between ho-hum growth and true dynamism. Frankly, the more the government tries to tell investors how to run and manage their businesses (e.g. ownership levels, restrictive manpower rules, curbs on finances, etc.) the less attractive the investment market will be, especially if there are other “easier” alternatives within Southeast Asia that would still give companies access to the ASEAN Economic Community (AEC).
As we go to print, we are encouraged by the deregulation and stimulus packages recently unveiled by the government. There have been four packages of revised rules and regulations so far with many more to come including changes to the Negative Investment List (DNI). This is all welcome. It is time, frankly, for bold steps to unlock the doors to renewed progress in the Indonesian economy.
This report was another piece of Paramadina Public Policy Institute. We highlight challenges and opportunities in letting Indonesia grow better and better. The most important thing is the potential of bettering off FDI climate to support the development of the country.
This Taking Stock: US-Indonesia Investment 2015 report was published by Amcham Indonesia and presented during the visit of President Jokowi in the US, October 2015.