Why Invest in Indonesia
1. SOUND ECONOMY
Indonesia is an emerging global powerhouse in Asia. With the GDP expected to reach US$ 1 trillion in 2012, Indonesia is the largest economy in Southeast Asia. Much less affected by the global financial crisis compared to its neighboring countries, Indonesia’s economy grew by 5.7% in 2013, making “The World’s Most Stable Economy in the Last Five Years” according to The Economist Magazine.
Indonesia grew by 6.2% in 2012 and in 2014, stronger economic growth is expected around the lower end of the 5.8-6.2% range. Future economic expansion is expected to include more inclusive growth as nominal per-capita GDP is expected to quadruple by 2020, according to a Standard Chartered report.
A large part of our economic success is a result of growing middle class and stable economic growth. Indonesia is in list of MINT economies (Mexico, Indonesia, Nigeria and Turkey), namely those that were the most attractive to long-term investors due to their favorable demographic profiles.
Indonesia’s debt to GDP ratio has steadily declined from 83% in 2001 to be less than 26% by the end of 2013, the lowest among ASEAN countries, aside from Singapore, which has no government debt.
As a result, the Republic continued to receive good reviews. The rating reflects Indonesia’s resilience to the global financial crisis, improving government and external credit-metrics, and an ability to manage domestic political challenges to the reform agenda.
· Fitch Ratings (November 15, 2013): affirmed Indonesia's sovereign credit rating at BBB- level with stable outlook.
· Rating and Investment Information, Inc (October 11, 2013): affirmed Sovereign Credit Rating of the Republic of Indonesia at BBB-/stable outlook.
· Japan Credit Rating Agency, Ltd (July 22, 2013): affirmed Indonesia’s foreign currency long-term senior debt at BBB- with stable outlook.
· S&P (May 2, 2013): affirmed Indonesia’s sovereign credit rating, at BB+ level for long-term.
· Moody’s Investors Service (January 18, 2012): upgraded Republic of Indonesia’s foreign and local-currency bond ratings to Baa3 with stable outlook.
2. POLITICAL STABILITY
“One of Asia Pacific’s most vibrant democracies that has maintained political stability…”
(The World Bank, 2013)
Underlying Indonesia’s vibrant economy is political stability. A decade ago, many analysts envisaged that certain break-away provinces would bring about Indonesia’s “balkanization”. In 2001, Indonesia embarked on an ambitious and challenging decentralization effort. While it has been challenging journey, today Indonesia is one of the most decentralized countries in the world with substantial funds and authorities devolved to the regions.
Significantly, Indonesia is the only country in Southeast Asia that has bucked the trend of a democracy in trouble. Democracy is blossoming in a country that was once ruled with an iron hand for 30 years. Indonesia has gracefully transformed from an authoritarian state to a regional role model.
For a third time in a row, Indonesia completed another round of peaceful and successful legislative and presidential elections. Indonesia is going to hold general elections this year 2014. President Susilo Bambang Yudhoyono, now in his second term. The government will work extra hard to maintain political stability ahead of the general elections, so that the possible escalation of political tensions does not effect business.
3. INVESTMENT CLIMATE
This updated investment law redefines “capital investment” as all investments, whether by domestic or foreign investors, for the first time offering equal treatment to all investors. There is no longer a limit of 30 years on foreign investment permits, and gone is the provision in Law 1/1967 for they’re to be divestment. Additionally, the new law allows for the unimpeded reparation of capital.
No later than February 2014, all Indonesian citizens who want to do a business should enjoy the faster and easier process. This is the main target of the Policy Package to Improve the Ease of Doing Business. The government sets a target of eight areas of improvement to increase the ease of doing business, namely:
1. Starting a Business
2. Getting Electricity
3. Paying Taxes and Insurance Premium
4. Enforcing Contract
5. Resolving Insolvency
6. Registering Property
7. Dealing With Construction Permits
8. Getting Credits
In these areas, the Government sets a total of 17 actions. Each area covers one or more actions. However, all action must be implemented by February 2014.
On 23rd August 2013, the Government of Indonesia announced economic policy packages, among others aimed at increasing investment.
1. Streamlining investment licensing
· Cutting barriers, particularly licensing procedures.
2. Revising the “negative investment list”
· To make the investment law more and more investor-friendly.
· The new updated list of sectors open for FDI will be announced soon in within this year.
3. More tax incentives
· Tax dispensation to labor-intensive industries: textile, apparel, footwear, furniture, and toys industries.
· Additional tax deduction to firms with at least 30 percent export-oriented products.
4. NATURAL RESOURCES
ABUNDANT NATURAL RESOURCES:
Indonesia is a renowned market for resource extraction, seen as even more attractive than for instance, South Africa, Australia and Canada in terms of mineral prospectivity, as per Pricewaterhouse Coopers.
The country is home to a biodiversity that is only second to Brazil. Rich with natural reserves, Indonesia has become a commodities powerhouse and a leading commodities exporter in a number of resources, including:
Abundant Natural Resources: The Key Indicators