As part of Belt and Road Initiative (BRI) financing scheme, China is committed to provide more than USD 100 billion for the Southeast Asian region. This is aimed to reach 20 countries in 6 economic corridors as well as to create 58 economic centers which are expected to generate more than USD 1.1 billion in income taxes and some 180,000 employment opportunities in these countries.
During the past 5 years, China’s Foreign Direct Investment (FDI) to Indonesia has been growing rapidly from the 12th largest in 2012 to the 3rd largest in 2017, with the realization of more than 5,000 projects worth USD 7.89 billion. The secondary (manufacturing industry) sector has been the largest during the period (64.1%) with top investments in metal, machinery and electronic industries (51.6%). Most of these investments have been located in Sulawesi (58.3%) and Java (32.1%).
WHY INVEST IN INDONESIA?
Indonesia’s rank in Ease of Doing Business has been progressing positively in the past five years, from the 129th in 2013 to 91st in 2017; and with the latest improvement to the 72nd rank in this early 2018, Indonesia has also been recognized as one of the top improvers. Indonesia also ranks higher in the Global Competitiveness Index with improved scores in terms of institution, infrastructure, macroeconomic, health, primary education, technological readiness and business sophistication.
The Government of Indonesia has been focusing on structural reforms, covering the institutional reform by creating institutions applying good governance and adaptive to change; regulatory reform by developing regulations that foster innovation, competition and growth; and fiscal reform through more effective and efficient management of fiscal policies. In line with the rapid growth to the digital technology, the Government had also made adaptive moves towards paperless licensing,
Speaking on the Indonesia-China trade ties in line with BRI, Husen Maulana, Director of Regional Promotion Facilitation of the Indonesian Investment Coordinating Board, emphasized President Joko Widodo’s commitment to improve infrastructure in Indonesia.
The Indonesian Government is currently running a massive infrastructure development program to support the country’s future economic growth. These programs aimed to increase accessibility in supporting country and regional economic growth – involving the development of public roads, toll roads, city and inter-city railways, power plants, dams and irrigation systems, oil refineries, rapid transit bus network in 29 cities, MRT in 6 metropolitans and 17 large cities, 24 sea ports, 60 ferry ports, and 15 airports. The Government is also developing new centers for economic growth, including Special Economic Zones, Industrial Zones and Strategic National Tourism Zones.
“Seen from country’s strategic potentials and locations in the Southeast Asian region, Indonesia should see the benefits of China’s BRI,” according to Maulana.
Currently four integrated areas are proposed for the inclusion in BRI, i.e. North Sumatera, North Kalimantan, North Sulawesi and Bali, with a total of USD 17.2 billion investment opportunities in North Sumatera, USD 26.5 billion in North Kalimantan, USD 10.5 billion in North Sulawesi and USD 10.3 billion in Bali. These cover both Government-funded projects and private investment opportunities.
To facilitate investment, the Government of Indonesia has prioritized 5 investment sectors, namely infrastructure, manufacturing industry, lifestyle industry, maritime and tourism. Ten new tourism destinations are on the priority list for the development, covering both Special Economic Zones for Tourism, as well as Strategic Tourism Zones.
A number of investment promotional events have been scheduled to be held in 2018, including the Regional Investment Forum 2018 (Yogyakarta, 14-15 March), Voyage to Indonesia 2018 and the IMF – World Bank Annual Meetings 2018 (Bali, 8-14 October), featuring other investment-related and cultural side events. HSBC will be one of the Indonesian Government’s partners in conducting the parallel events in Bali, focusing to promote BRI in Indonesia.
Speaking at the event, Mrs. Do Pang Wai-Yee, Director-General of Hong Kong Economic and Trade Office pointed out the important role of Hong Kong as the key link to BRI, particularly considering the country’s prime geographical position and the dual advantages of being One Country with Two Systems. Hong Kong has the advantage of being an international financial centre as well as an international hub for logistics, shipping and transport, providing high-end professional services. With the Mainland China being the country’s largest trading partner, Hong Kong is also an important gateway for the trade between the Mainland and the rest of the world, including ASEAN – which was the 2nd largest partner for merchandise trade in 2017. It is therefore beneficial for ASEAN companies – including Indonesian companies to use Hong Kong to tap opportunities along the Belt and Road. In support for the BRI, the Hong Kong Special Administrative Region has developed the HKTDC’s Belt and Road Portal since 2015 and conducted the Annual Belt and Road Summit since 2016.
Highlighting Indonesia’s economic outlook, Ali Setiawan, Head of Global Markets and HSS of PT Bank HSBC Indonesia, spoke of the transition in Indonesia’s economy and the positive changes in the structure of domestic demand, along with the positive effects of stabilization of infrastructural investment in China and the increasing trend of consumption’s contribution to the country’s GDP growth.
As for Indonesia, while private consumption remains stable during the past few years, the structure of domestic demand has been showing potential increases in gross investment. The Indonesian Government’s moves to provide better incentives for private sector investment has been considered to be a key-factor, particularly considering the potentials for continued improvement in FDI.
HSBC is a partner of the Chinese Government for the BRI Scheme and has been conducting most of its business activities in Asia, with presence in all BRI target areas including Indonesia – where HSBC has a distinctive position as a local legal entity with a global reach. HSBC is ready to establish cooperation with Indonesian companies to support infrastructural development projects nationwide. To ensure good governance and create a conducive investment climate, HSBC has established communications with the Indonesian Government – including the Investment Coordinating Board (BKPM) and the Ministry of State-Owned Enterprises. In providing services for local companies, HSBC has also positioned itself as a business partner rather than a competitor to other local banks, serving areas not being not covered by these banks.
The HSBC Business Forum on Indonesia-China Business Networking was held by PT Bank HSBC Indonesia on 27 February 2018 at Fairmont Hotel Jakarta, involving delegations from China’s industries seeking opportunities for new investment, network and partnership.