Buoyed by strong economic growth and a relatively stable political environment, Indonesia is poised to become a key investment destination for US companies, provided that the historical impediments to investment in the country are addressed, the US-ASEAN Business Council says.
The council visited Jakarta from Monday to Friday as part of an annual program, meeting top government officials and business leaders for consultation. The council arrived with its largest-ever delegation, comprising 35 executives from US companies, including Ford Motor Company, Procter and Gambler, Monsanto, IBM, Freeport, Caterpillar and Seagate.
The delegates have so far had the opportunity to discuss their concerns regarding the investment climate with Vice President Boediono, Trade Minister Gita Wirjawan, Defense Minister Purnomo Yusgiantoro, Indonesian Chamber of Commerce and Industry chairman Suryo Bambang Sulito and the Indonesian Employers’ Association (Apindo) chairman Sofjan Wanandi.
Sofjan said that US firms are seeking to invest or expand their businesses in Indonesia, but still need government assurance on a few issues, such as legal certainty, infrastructure and labor.
“Indonesia will become a key destination for investment by US firms and there will be much more investment in the near future,” he told The Jakarta Post.
Council executive committee member Clay Thomson, who also represents heavy equipment giant Caterpillar, says US companies, particularly those in finance, manufacturing, IT and the food industry, are keen to invest and are already seeking opportunities here. More conducive business conditions, however, are desired.
“A lot of factories go into investment stability, confidence that contracts are going to be upheld, confidence that the judicial system is fair, plus a lot of other factors. But, those are some [of the issues] that international companies talk about the most when trying to decide where to put their money,” he told reporters after meeting officials at the Industry Ministry’s office on Thursday.
US-ASEAN Business Council president Alexander C. Feldman said that Fitch and Moody’s recent upgrade of Indonesia’s sovereign rating would help spark interest from global investors, including the US.
Last December, Indonesia regained an investment grade credit rating from Fitch Ratings 14 years after losing the status following the country’s worst-ever financial crisis in 1998. In January, Moody’s Investors Service made a similar move by raising its rating to investment grade.
“Obviously, it makes people a little more comfortable as international investors come to Indonesia,” he said.
Enhanced infrastructure was not only a key to attracting more robust investment in the future, but would also create business opportunities for US investors, Alex said in reference to the recent expansion of US heavy-equipment manufacturing firm Caterpillar. Caterpillar is reportedly building a US$150 million plant in Batam, Riau Islands, to cope with the country’s surging demand for heavy equipment, necessary for infrastructure development, plantations and mining projects.
In January 2012, Monsanto revealed its plan to make Indonesia a production base for corn seeds to supply the Southeast Asian market. It has allocated $40 million to develop hybrid and transgenic corn seeds in Mojokerto, East Java. In Indonesia, the agricultural biotechnology giant contributes to around 15% of domestic corn demand. It has also assisted the government in developing oil palm and rubber seeds.
The US has been one of Indonesia’s top investors. Last year, US companies injected $1.5 billion, representing 7.78% of the total foreign direct investment of $19.28 billion, making it the third-largest foreign investor in the Southeast Asia’s largest economy. (The Jakarta Post, Linda Yulisman)