Indonesia streamlines investment process

Franky Sibarani, chairman of the Indonesia Investment Coordinating Board, stressed that foreign investment has continued to grow in Indonesia despite a global economic downturn. Investment realization reached $44 billion and commitment increased to nearly $150 billion last year.

“As the world’s fourth most populous country and the largest economy in Southeast Asia, Indonesia offers a large market and growing middle class,” he noted. “On top of that, the (Association of Southeast Asian Nations) Economic Community launched at the end of last year integrates ten economies of Southeast Asia as a united production base.”

Indonesia is the 16th largest economy in the world with $900 billion gross domestic product. It has 250 million people, 60 percent of whom are of working age, and more than 17,000 islands spanning three time zones, making it the largest archipelago nation in the world.

Indonesia, which plans to join the Trans-Pacific Partnership and is currently negotiating the Indonesia-European Union Comprehensive Economic Partnership Agreement, represents 40 percent of the region’s population and 38 percent of its economy.

The country has initiated large-scale infrastructure projects to improve physical connectivity through building new roads, railways, seaports, airports, broadband systems, crossing docks and urban public transportation. Some 37 seaports and more than 230 airports exist in the country.

Korea is the fourth-largest investor nation in Indonesia after Singapore, Japan and the U.S., with more than $8 billion poured in since 2010. Korean businesses have buoyed Indonesia’s industrialization, job creation, knowledge and technology transfer and national export, Sibarani said.

Indonesia is the eighth-largest export destination for Korea and the eleventh-largest import destination for staple items such as coffee, seafood, furniture, processed food, nickel and coal.

Trade balance favors Korea, with Indonesia exporting $7.65 billion of products and materials to Korea and importing $8.43 billion of goods last year. Five priority sectors for investment are manufacturing, infrastructure, agriculture, maritime business and tourism.

According to Shinta Kamdani, vice chairman of the Global Entrepreneurship Program Indonesia, infrastructure development goes beyond connectivity into water management, energy, public housing and broadband connection.

“This year is timely for investing in Indonesia, as lower energy prices around the world have reduced production costs, labor-intensive manufacturing is becoming cheaper compared to China and investment climate is improving,” she said.

Fifteen industrial parks will be built in Sumatera, Kalimantan, Sulawesi, Maluku, Papua and Jawa by 2019, adding to four free trade zones in Sabang, Batam, Bintan and Karimun.

To facilitate investment, three major reforms have been implemented under the current administration.

The one-stop integrated service combines functions of 22 ministries and government institutions through the Investment Coordinating Board, freeing investors from previously having to come to Jakarta for consultation and permits and helping process licenses for various sectors such as manufacturing, power, tourism, oil and gas.

The three-house licensing service enables investors to obtain eight permits plus a land-booking letter in one place in one visit within three hours.

The direct construction service allows investors to start construction before obtaining building permits. No minimum investment or number of workers is required, and the service is provided across 14 industrial parks in Sumatra, Java and Sulawesi, with more to join the list.

Companies operating in eight Special Economic Zones receive incentives and facilities, with three additional SEZs to be developed by 2019.

As part of the economic policy package introduced last September, a minimum wage has been set, more sectors have opened and distributors affiliated with production, electronic commerce and film industries are now available for business.

Export-oriented industries are eligible to exemptions in import duty, luxury tax and value-added tax covering machinery, equipment and raw materials. Customs clearance for imported capital goods has been streamlined to 30 minutes.

By Joel Lee (joel@heraldcorp.com)