Going for Indonesia
    Category: Outlook 2014 By : Ardian Wibisono Read : 853 Date : Monday, November 04, 2013 - 08:43:40

    Courtesy of American Chamber of Commerce

    Despite the hot money flowing out of the country due to the uncertainty of the global economy, Indonesia seems to be holding its appeal as an attractive place to invest in—at least for Americans. Foreign direct investment from U.S. investors reached $65 billion in the period of 2004 to 2012, and U.S. firms plan to invest another $6.1 billion by 2019, according to a recent report from the American Chamber of Commerce in Indonesia and its U.S. counterpart, the U.S. Chamber of Commerce, the oldest and largest trade organization of U.S. companies, with three million members.

    The extent of U.S. investment in Indonesia was not previously known because the researchers had access to additional information that doesn't normally show up in public records or was mislabeled as investment coming from other countries—for example, an investment coming from a U.S. firm's Singapore subsidiary may be counted as a Singaporean investment not an American one.

    In 2012, extraction and manufacturing remained the focus of U.S. investment in Indonesia with more than 95% of total investment allocated to these sectors. However a growing middle class has made U.S. investors to look more at the consumer sector. Forbes Indonesia talked with Tom Donohue, president and chief executive of the U.S. Chamber of Commerce, during a visit to Jakarta in early October. Tom highlighted the need for Indonesia to address infrastructure and regulatory issues in order to attract even more investment.

    The $65 billion, is it realized? What is the measurement?

    It is realized investment. What is really interesting is that some of the investment is made by U.S. company subsidiaries based outside of the U.S. Right now, in the public number, we will be at the fourth largest country that invests in Indonesia. However, there is some suggestion that we could be the largest.

    Does the forecast for investment take into account that the government is trying to slow growth?

    Everybody is worrying about the current economic circumstances. Indonesia is worried about what will happen if the U.S. Federal Reserve rolls back its easing because plenty of money will leave the country. Everybody we talked to wants growth to ease for a while, but everybody also believes that a strong trade relation with the U.S. is essential. On top of that, the president of China is here visiting Indonesia and he is talking about signing billions in investment contracts. Indonesia has a large population, it has many talented people that want to work, and the country is also expanding its education. There is a balance to do business here, but people who are going to win are those who have a direct investment and access to the market. One of the big things that was discussed in the APEC meeting, among others, is the Trans-Pacific Partnership (TPP) trade agreement with members so far from Australia, Brunei, Chile, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam. The TPP is making positive headway. We really believe it is going to get there. There are statements of worry, more a concern about rapid inflows of capital, but I don't think the government is opposed to quality investment. There is an interesting tendency that many years ago people were investing in commodities, now there is a huge increase in consumer-focused investments. Other investment areas are infrastructure and transportation.