Investment Opportunities in Indonesia
Investment Opportunities By Provinces
Indonesia offers several competitive advantages for investors, including:
- Large domestic market and competitive work force arising from its economy and population size i.e. the largest economy in Southeast Asia with more than 220 million people.
- Market-based macroeconomic policy and free foreign currency exchange regime.
- Potential outsourcing partners stemming from the large pool of small and medium enterprises (around 42 million) throughout the country.
- Abundance of diversified natural resources, including agriculture, plantations, fisheries, mining and oil and gas, inherit in its vast and fertile land.
- Strategic location spanning across several vital international sea transportation routes.
- And more importantly, a democratically elected government committed to reforming and promoting conducive investment climate in the country.
Investors are welcome to tap into the following sectors:
- Agribusiness - cultivation of soybean, corn, rubber, oil, palm, cocoa, coffee, cashew nut, sugar cane;
- Fisheries - marine and brackish water fisheries;
- Industries - chemical and pharmaceuticals, foods, wood and furniture products, pulp and paper, electronics, automotives, textile and garment;
- Infrastructure and power plants, toll roads, airports, harbors, telecommunications, water plants;
- Services - trading, hotels and restaurants, warehouses, recreational and entertainment services, technical and engineering services.
Investment Opportunities In Infrastructure
Compared to other developing countries, Indonesia has a relatively low level of infrastructure service coverage. For instance, there was inadequate provision of watersupply (39% of urban population), low road density level (1.6 km/1,000 people), low electricity consumption (319 kwh/capita) with 45% of households not connected to the electricity grid, low access to urban sanitation service (3%), low fixed line tele-density (only 27 lines per 1,000 people), and other examples that confirm the need for increases and better provision of infrastructure services.
Policy changes from the government are required, if the financing gap is to be filled. These changes are expected to create a friendlier business environment that has greater policy predictability, reduction of project outcomes uncertainty and reduction in project risks. Such environment would increase infrastructure development by lowering the cost of capital and attracting local premium long-term saving institutions. The creation of new and more predictable regulatory arrangements would require substantial efforts from ministers and officials. Projects are to be implemented in a competitive and transparent manner. Private sector players were asked by the government of Indonesia to keep the pressure on the government, its ministers and officials to much higher standards of performance.
The aim is to make infrastructure as a new, predictable and secure class of investment attractive to foreign and domestic investors. As the Vice President Kalla said, "To put this in sound commercial terms, we wish on outcomes on fees and tolls that are commercially sound, competitively determined predictable and fair". If the charges and fees for infrastructure services are competitive and tendered, and regulated by contracts that include indexation against cost changes, for example, this makes infrastructure earnings less risky and capable of attracting much capital at reasonable costs. Lower capital costs mean lower total costs - and that is good news for those demanding more infrastructure services. Questions of affordability are also more readily dealt with when we have budget savings, so there should be no case to argue against our new infrastructure strategy on grounds of affordability - as we will have saved resources which can be used to assist those in poverty for whom such charges are a potential burden. This is what we call as "pro-poor, pro-employment, and pro growth infrastructure development".
Indonesia's investment statistics are available here.
Reformations - Transportation
The government has laid the foundation for national economic expansion through monetary and macro economic stability. The role of transportation is expected to be able to accelerate the process of economic revival and to stimulate a more equitable distribution of development. Through Presidential Instruction (Inpres) No. 5/2003 on Economic Policy Package with IMF Monitoring or commonly known as the White Paper, three transportation policies have been stipulated.
These policies are:
- Rehabilitate the damaged transportation means and infrastructure and enhance the facility of inter-modes shifting.
- Develop transportation means and infrastructure in areas with large economic potential.
- Enhance the participation of the private sector and the community in the provision of transportation means and infrastructure.
The role of transportation in the economic development is broader than the contribution shown in productivity in respect of the Gross Domestic Product (GDP). Transportation infrastructure is external vital because it supports the productivity of other sectors and provides multiple benefits.
The targets of the development of the national transportation system are multi dimensional, including:
- To develop a transportation system that supports regional development;
- To develop a transportation system that supports the realization of an efficient and just economic system;
- To develop a transportation system that supports the effort of unifying the nation;
- To develop a transportation system that will be able to maintain sustainable development; and
- To provide efficient, reliable, safe and affordable transportation services.