Indonesia’s unstable rules keeping foreign investors away

February 6, 2018 at 10:00

Indonesia’s unstable rules keeping foreign investors away

Reuters | February 5, 2018


Joko Widodo

Indonesian President Joko Widodo in February 2016 opened up sectors like e-commerce and telecommunication equipment to foreign participation in a move dubbed ‘Big Bang’. — AFP

JAKARTA — The chief of Indonesia’s investment board said on Friday frequent and abrupt changes in regulations were discouraging foreign investors from putting money into Southeast Asia’s biggest economy.

Earlier last week, Thomas Lembong warned that Indonesia is ”still losing out” to neighbors such as the Philippines, Vietnam and Thailand.

Mr. Lembong, head of the Investment Coordinating Board, told reporters on Friday it is common knowledge that “sudden and constant changes in regulations create instability that is hard for any investor who’s willing to take a risk with their capital.”

“Thailand, Vietnam, Malaysia have more stable regulations.”

Foreign investors have applauded some efforts by the government to streamline regulations, but say there are still too many restrictive regulations and a stifling bureaucracy.

Indonesia’s economy has been growing at about five percent annually in recent years, but policy makers have been frustrated by an inability to speed up the pace, partly due to sluggish consumption and tepid investment.

Last year, Indonesia recorded 8.5% more foreign direct investment (FDI) in rupiah terms than it attracted in 2016.

For 2017, FDI in sectors excluding banking and oil and gas was 430.5 trillion rupiah ($32 billion). For 2016, it reported an 8.4% increase in rupiah terms.

Indonesia has sought to scale back a so-called “negative investment list” that restricts or caps sectors open to foreign investors.

In February 2016, President Joko Widodo’s administration opened up sectors ranging from e-commerce and telecommunication equipment in a move dubbed “Big Bang”.

But Mr. Widodo’s pledge to revise the list further is yet to materialise.

The revision “is in process. The president has instructed us to evaluate this but let’s abide by the existing one for now,” Trade Minister Enggartiasto Lukita said on Friday.

On Wednesday, Mr. Widodo warned that Indonesia was losing out to neighbours in export markets.

“This big country of Indonesia is inferior to Thailand in terms of exports. With enormous resources and human resources, we are losing. There is something wrong and something has to be changed,” the state news agency Antara quoted him as saying in a speech at the Trade Ministry.

Mr. Lukita said overcomplicated regulations and red tape were also obstructing foreign trade agreements.

Indonesia had only reached one free trade deal in the past eight years, with Chile, he said. — Reuters


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