Business-friendly climate lures investors

THE SPARKS ARE FLYING as the economy takes off.

As stability returns to Indonesia, so too does the country’s attraction for foreign investors once again rise. Since the 1997 Asian crisis, foreign investment in the country dropped steeply mostly due to the political instability, a weak currency, and an uncertain economy. Recently, however, encouraged by the upswing in Indonesian politics, investors have begun to show a renewed interest–due in no small part to the fact that in Indonesia at the moment, the price is right. In January, ING Barings recommended that investors cut their holdings in China in favor of Indonesia on price alone. This is good news for the Indonesian government, which has some $6 billion in assets to sell. But the country’s cheap assets are not its only attraction as Coordinating Minister of Economic Affairs Dorodjatun Kuntjoro-Jakti confirms. “Indonesia has a large population and quite an open economy. We are in the midst of one of the busiest regions in the world. Furthermore, I think that in South East Asia, Indonesia has the largest trainable labor force.”

For its part, the government is taking steps to promote a freer investment climate by liberalizing policy and providing incentives. A new investment bill, which went to Parliament in February and will replace the existing laws on foreign and domestic investment, proposes opening all sectors of the economy to foreign investors, minimizing the negative investment list to leave only a few protected areas such as religion and culture. Under the new law, the government will treat foreign and domestic investors equally and establish a centralized one-stop service center for speeding up investment licensing procedures. Also included in the bill are government plans for providing incentives for foreign investors (including tax cuts), especially for those interested in setting up joint ventures with Indonesian SMEs.

THEO TOEMION Chairman of Indonesia Investment Coordinating Board (BKPM)

Much of the credit for the improved investment climate and the new draft bill lies with Indonesia’s Investment Coordinating Board (BKPM) and its chairman, Theo Toemion. BKPM is Indonesia’s agency for promoting foreign investment and preparing and assessing national investment policy. Mr. Toemion states, “our main job is to promote our country and investment in Indonesia. While the momentum is still there, we must show the world that we really mean business and that the nature of doing business in Indonesia is changing.”
Fears of an unstable and weakened banking system are also being put to rest as the government takes measures to insure depositors’ money. As
Minister of Finance Dr. Boediono elaborates, “with regards to the safety of customer’s bank deposits, we have placed a blanket guarantee on all bank deposits. So whatever may happen to the bank, the deposits are safe.” Furthermore, BKPM is involved in a coordinating effort among ministries to address previously antagonistic security and justice problems. Chairman Teomion states, “once I was appointed and entered this institution, I realized that investment is very much related to stability, security and law enforcement so I have set up a special task force that includes police, army, and intelligence sectors. I believe these problems should be solved before we invite new investors. That’s my policy.”