Jakarta. U.S. President Barack Obama’s trip to Indonesia should boost investment in Southeast Asia’s biggest economy and curb negative perceptions on doing business in the nation, Indonesia’s investment agency said on Tuesday. Obama, who spent four years in Indonesia as a child, will make his first visit to the country as president on March 20-22.
Gita Wirjawan, head of the investment coordinating board, said Obama’s visit to the world’s fourth most-populous nation would get Indonesia on the radar screens of more investors. “There’s not enough people in (Washington) DC who know about Indonesia, who are familiar with Indonesia,” Wirjawan, a former investment banker with JP Morgan and Goldman Sachs, told foreign correspondents.
“This, I think, will elevate Indonesia to a new awareness level, which I think we have got to take advantage of,” he added, noting Indonesia was too often known for natural disasters and terrorist attacks rather than as a potential investment hot spot. Wirjawan, who was appointed last year by President Susilo Bambang Yudhoyono with a mandate to boost investment, said the Obama trip would help companies look seriously at Indonesia.
Indonesia has faced stiff competition from regional rivals such as Vietnam and China attracting foreign direct investment, and investors often complain about obstacles such as tortuous red tape, widespread corruption and a shaky legal system.
Six percent growth
Wirjawan said he did not want to gloss over problems facing investors, but there were opportunities because even “if all of us (in government) went to sleep for the next five years there is a good chance our country would still grow at 6 percent”. Indonesia’s economy grew 4.5 percent last year, faring much better than most neighbours, helped by its large domestic market and relatively lower proportion of exports.
The government expects the economy to grow 5.5 percent this year, before picking up speed going into the decade. Indonesia was was one of the star emerging markets last year with stocks up 90 percent, government bonds up 20 percent, and the rupiah, Asia’s best-performing currency, up 17 percent against the dollar last year.
Agreements on education, security, and trade and investment would be signed during Obama’s visit, including one related to the Overseas Private Investor Corporation (OPIC), Wirjawan said. The U.S. government agency provides insurance for companies investing in developing countries.
“Some, if not many, companies in the U.S., have taken a view not to invest in Indonesia unless there is coverage for political risk,” said Wirjawan. Indonesia hosts a number of major U.S. companies, including global resource firms such as Chevron and Freeport McMoRan Copper & Gold Inc, although much of the investment dates back decades.
Indonesia’s realised foreign investment last year was about $13 billion to $14 billion, but the nation should be able to achieve a “sweet spot” of up to triple that at $25 billion to $35 billion, Wirjawan said.
China-ASEAN FTA
He played down concerns that a free trade agreement signed this year between China and the 10-member Association of South East Asian Nations (ASEAN) would hurt Indonesian businesses and see a flood of cheap imports from their giant neighbour “That, to me, is somewhat of a misplaced view,” he said, adding that the two economies had developed in complementary ways that meant China could offer opportunities as a big new
market.
Wirjawan said he hoped a presidential decree on investment in strategic areas such as pharmaceuticals, agriculture and healthcare would be signed in March. Foreign investment of up to 61 percent would be allowed in hospitals across Indonesia, a move that should improve the quality of healthcare, he said.
Up to now, foreign investment in hospitals has only been allowed in a few regional cities. “The reality is many of us go to Singapore for anything beyond flu,” he said, estimating health spending by Indonesians abroad could amount to $300-$400 million a year.
Source: Kompas – 03 March 2010
Photo: The New York Times
