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Indonesia frees up foreign investment

Indonesia’s trade minister Tom Lembong. Photo from bacaini.com

Indonesia’s trade minister Tom Lembong. Photo from bacaini.com

John Chalmers & Kanupriya Kapoor [RAW]

Indonesia has opened dozens of sectors to foreign investors in what President Joko Widodo has described as a ‘Big Bang’ liberalisation of its economy, Southeast Asia’s largest.

President Joko Widodo’s administration loosened foreign investment restrictions on Thursday, on everything from restaurants and agriculture to health facilities and movie theatres.

‘Today’s revisions represent our largest opening to international investment in 10 years,’ Trade Minister Tom Lembong told Reuters.

‘More international investment will bring more capital, more world-class expertise, more technologies to Indonesia. Domestic players must seize those opportunities.’

Twenty-nine sectors including restaurants and the movie industry were removed from the ‘negative investment list’ (DNI) altogether, meaning that foreigners can operate in those areas without restrictions.

The negative investment list sets out which parts of Indonesia’s economy are partially or fully closed to foreign investors, who in recent years have complained of rising economic protectionism and nationalism as they look to expand into the market of more than 250 million people.

Widodo told Reuters in an interview on Wednesday he was opening up more room for foreigners in the latest of 10 policy packages since last September aimed at stimulating the economy, which grew by 4.8 per cent last year, the slowest since the 2009 global crisis.

The investment revisions were supposed to come out in early January, but Widodo postponed the announcement because he was not satisfied that the reform was radical enough, Lembong said.

Thursday’s announcement was not all about opening up Indonesia’s industries, however. Nineteen sectors, including low-tech construction, were added to the list of industries with foreign investment restrictions.

Although foreign direct investment into Indonesia has risen in recent years, it remains among the lowest in Southeast Asia in relation to total investment and gross domestic product.

Foreign investors have pushed for years for a greater access to opportunities in Indonesia’s vast domestic market, valued at some $US840 billion ($A1.18 trillion).

Foreign businesses applauded the latest move as a sign that Widodo was moving in the right direction.

‘This will help restore confidence that Indonesia is open for business,’ said Adrian Short, chairman of the British Chamber of Commerce in Jakarta.

But he stressed that ‘implementation of the regulations will be key.’

Lin Neumann, head of the American chamber, also said the reforms were a step in the right direction but the proof would be how investors arriving in newly opened sectors are greeted.

‘We’ve gone through literally years of Indonesia closing down its economy to foreign investment, and so the leadership realises that in order to reach their goals they need foreign investors, but they have to make it possible for investors to be here, and that’s not always been the case,’ he said.

Some local investors were less gushing about the reform, complaining that it had been rushed through without sufficient consultation.

‘In my opinion, the timeline to discuss the DNI was too short,’ said Hariyadi Sukamdani, the chairman of Indonesian Employers Association (APINDO).

‘Liberalisation may increase employment, taxes, etc. But we have to think about ownership, too.’


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