Indonesia has been attracting foreign investors for decades with its abundant natural resources and a large market potential. Over the years, the government of Indonesia has introduced various measures to promote foreign investment in the country. In 2020, Indonesia remains a popular destination for foreign investment despite the challenges posed by the COVID-19 pandemic.
Overview of Foreign Investment in Indonesia
Foreign investment in Indonesia has been growing steadily over the years. According to the Indonesia Investment Coordinating Board (BKPM), the total value of foreign investment in Indonesia in 2019 was USD 29.3 billion, an increase of 12% compared to the previous year. The majority of foreign investment in Indonesia comes from Singapore, Japan, and China.
The Indonesian government has set a target of attracting USD 20 billion in foreign investment in 2020. Despite the challenges posed by the COVID-19 pandemic, the government is optimistic that it can reach this target.
Investment Opportunities in Indonesia
Indonesia offers a wide range of investment opportunities across various sectors. Some of the sectors that are particularly attractive to foreign investors include:
Manufacturing
The manufacturing sector in Indonesia has been growing rapidly in recent years. The government has introduced various measures to promote manufacturing activities in the country, including tax incentives and the simplification of investment procedures.
The automotive industry, in particular, has been experiencing significant growth in Indonesia. Major automotive companies such as Toyota, Honda, and Daihatsu have established manufacturing plants in Indonesia.
Tourism
Indonesia is a popular tourist destination, attracting millions of visitors every year. The government has been investing heavily in the tourism sector to further promote tourism activities in the country. The development of infrastructure, such as airports and highways, has been a key priority for the government.
The government has also been promoting the development of eco-tourism activities in Indonesia, particularly in the eastern part of the country.
Infrastructure
The Indonesian government has been investing heavily in infrastructure development in recent years. The development of infrastructure, such as roads, ports, and airports, is seen as a key enabler for economic growth in the country.
The government has introduced various measures to attract foreign investment in infrastructure development, including the Public-Private Partnership (PPP) scheme.
Challenges of Foreign Investment in Indonesia
Despite the opportunities that Indonesia offers, there are also some challenges that foreign investors may face when investing in Indonesia:
Bureaucracy
The investment process in Indonesia can be complex and time-consuming due to the bureaucracy involved. Foreign investors may need to navigate through various government agencies and obtain multiple permits and licenses.
Infrastructure
Although Indonesia has been investing heavily in infrastructure development, there are still areas where infrastructure is lacking, particularly in the eastern part of the country. Poor infrastructure can make it difficult for foreign investors to operate in some parts of Indonesia.
Legal System
The legal system in Indonesia can be challenging for foreign investors to navigate. The Indonesian legal system is based on civil law, which can be different from the common law system used in many Western countries. Additionally, corruption can be a problem in Indonesia.
Conclusion
Despite the challenges, Indonesia remains an attractive destination for foreign investment. The government has introduced various measures to promote investment in the country, and the potential for growth in various sectors is significant. With a large and growing market, Indonesia offers many investment opportunities for foreign investors.
