Indonesia Courts Foreign Investors with Image Makeover

JAKARTA

Indonesia is hoping to throw off its reputation for natural disasters and corruption and become a magnet for the foreign investment deemed vital to its plans to become an Asian powerhouse.

But Investment Coordinating Board chairman Gita Wirjawan said the mainly Muslim archipelago of some 235 million people has a long way to go before it can take its place alongside China and India in the so-called Asian Century.

“We’ve got a PR deficit… For foreigners, Indonesia is a country of tsunamis, earthquakes, terrorism, street demonstrations and scandals. That needs to be changed,” he told an economic conference in Jakarta.

“Nobody knows (that) Indonesia is the fourth-largest country in the world with 235 million people and the third-largest democracy.”

Spooked by the turmoil surrounding the 1997-1998 financial crisis and the fall of the Suharto regime, foreign investors have taken a long time to start to think again about Indonesia’s potential, analysts said.

But it is now roaring back into favour, with its large and upwardly mobile domestic market and sound economic fundamentals catching the eye of fund managers with a new appetite for risk.

“Three years ago, Indonesia was not seen as a relevant country by international investors,” HSBC Indonesia chief executive Rakesh Bhatia said.

“Now we see a continuous flow on the stock market (up more than 80 percent over the past year) … And Indonesia has done a remarkable job in fiscal and monetary policy. The currency is stable and the banking sector is very sound.”

Indonesia demanded attention as the rest of the world plunged into crisis in 2008-09, growing at 4.5 percent last year, third only after China and India in the Group of 20 industrialised and developing countries.

In addition to a growing middle class of 50 million people, Indonesia boasts low labour costs, vast natural resources, strong foreign currency reserves, low inflation and a recent record of sound economic management.

Its young democracy is not without its rough edges, but the country last year voted for stability when it re-elected President Susilo Bambang Yudhoyono, a centrist ex-general, to a second five-year term.

Yudhoyono has promised to remove regulatory bottlenecks to investment and stamp out rampant corruption, but analysts said words alone will not be enough to open the floodgates for foreign capital.

Poor infrastructure is another perennial problem which the government has vowed to address.

“Illustrative of the country’s inter-island infrastructure inadequacy, it apparently costs more for an orange juice distributor in Java to procure from Kalimantan than to do so from China, at least four times the distance away,” HSBC said in a report this month.

“Between 2004-2009, only 125 kilometres of toll roads were built in total, short of the 1,000 kilometres originally planned. China constructed 4,700 kilometres of toll roads in 2009 alone.”

Wirjiwan is frank in his assessment of the job ahead: “We have a big mission. But our task is not easy.”

He said Indonesia hoped to attract US$90 billion of private infrastructure investment in the next five years, the lion’s share of an ambitious $140-billion infrastructure spending plan.

Richard Kitts, head of Nokia Siemens Networks in Jakarta, said: “Indonesia has become a very exciting market for us.

“It has become easier to do business here. But the infrastructure challenges are huge,” he added.

Filed under: The Nation

2 Responses to “Indonesia Courts Foreign Investors with Image Makeover”

  1. Maurice Lecaros Says:

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  2. Carmen Goldeman Says:

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