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JAKARTA (TheInsiderStories) – Indonesia has made substantial progress in improving its business climate, as reflected in the increase of Indonesia’s global ranking in terms of ‘ease of doing business’ (EODB) a rating issued by the World Bank on Wednesday (Nov. 1): it raised the country 19 places, to 72nd position. However, business players, foreign investors and even government officials complain that there is still room to increase the ranking further, by continuing the economic reforms.

During a US-Indonesia business summit in Jakarta, Chairman of National Investment Coordinating Board (BKPM) Thomas Lembong stated that the economic reforms launched by President Joko Widodo government is not a ‘mission accomplished’, but rather a ‘mission unaccomplished’.

His statement echoed the statement made by President Joko Widodo himself on Wednesday that he is not yet satisfied. He wants the EODB ranking to move to 40th next year, indicating that further efforts need to be undertaken in terms of improving business climate.

‘I have told the Coordinating Minister for the Economy (Darmin Nasution) that I don’t want the ranking at only 72. The target is at least 50. Next year, we will push to reach the target of ranking 40,’ President Joko Widodo said on Wednesday (Nov. 1).

Given the ambitious target, the President has called on his ministers to carry out a program of total reform, starting from handling permits for small businesses to permits for multinationals or major projects.

President Joko Widodo has in the past two years rolled out a series of regulatory changes intended to encourage foreign investment and reduce dependence on private consumption. Among them are steps to ease business permits descending from Indonesia’s daunting bureaucracy.

Room for Reforms

U.S Ambassador to Indonesia Joseph R. Donovan Jr. applauded the apparent improvement of Indonesia’s business climate. However, he stated he sees that there is still room for the Indonesian government to carry on the reforms to attract more investment into the country.

He stated many U.S firms are eager to sell more goods in Indonesia, if the circumstances are right. Many firms find the Indonesian market potential promising, supported by a large population and growing middle class that is digitally connected. But, there are still significant challenges to doing business in the fourth largest population country.

For example, there are a number of U.S. solar companies interested in helping develop Indonesia’s solar power industry. However, the Ministry of Industry is considering enforcing a regulation which mandate the solar power plants use 40 percent local content in solar modules, increasing to 50 percent in 2018, and 60 percent in 2019. The same regulation also requires that solar power plants use 100 percent local content for services.

‘Such policies hinder Indonesia’s power generation goals by driving up costs and hampering access to the most innovate technologies and companies,’ said Donovan.

Many companies consistently say that new investment plans for Indonesia are held back or delayed by uncertainty in the regulatory environment and worries over compliance issues, according to John Goyer, U.S Chamber of Commerce senior director for Southeast Asia.

‘These delays come at the cost of slower economic growth in Indonesia. Offering a consistent business environment encourages U.S business investment and ultimately helps grow Indonesia’s economy,’ Goyer said.

U.S businessmen expect the two countries will work out win-win economic partnerships, by following through with economic reforms, working to continually improve the ease of doing business.

‘There is no question about Indonesia’s tremendous economic potential, but without supportive policy environment, that potential will remain out of reach,’ said Brian Arnold, president of American Chamber of Commerce (AmCham).

Chairman of Indonesian Chamber of Commerce and Trade Rosan Roeslani stated Indonesian private sector is ready to support the government to bring in more investment, including US investment.

‘There are enormous opportunities for the US to engage in our development efforts by increasing US investment in Indonesia, because the Indonesian government is now actively accelerating the implementation of its physical infrastructure programs, such as toll roads, railways, sea and airports, bridges,’ he said.

On the investment side, in 2016 U.S is the 6th– largest foreign investor in Indonesia. In 2015 the U.S invested in 261 projects for a value of US$893.2 million and in 2016 this increased to 540 projects with a value of $1.16 billion.

In terms of two-way trade, the U.S. is Indonesia’s 4th-largest trading partner in the world, as of 2016. According to statistical data from the Indonesian Ministry of Trade, total trade was recorded at $23.8 billion in 2015 and $23.4 billion in 2016.

Indonesia’s exports to the US were $16.2 billion in 2015 and $16.1 billion in 2016, and Indonesia’s imports from the U.S were $7.59 billion in 2015 and $7.29 billion in 2016. These represent a surplus of $3.57 billion in 2015 and $3.73 for Indonesia in the trade balance between Indonesia and the U.S.

The U.S. is also an important market for Indonesian products. Last year, Indonesia sent over $19 billion worth of textiles and apparel, shoes and rubber products, electronics and machinery, seafood and furniture, to eager buyers in the United States.

Written by Roffie Kurniawan and Elisa Valenta, Email: roffien@theinsiderstories.com and elisa.valenta@theinsiderstories.com

 

 

Written by Elisa Valenta, email: saevalenta@gmail.com