The government is trying to invited United States (US) companies relocated their factories from China to Indonesia - Photo by Bank Indonesia

JAKARTA (TheInsiderStories) – The government is trying to invited United States (US) companies relocated their factories from China to Indonesia, said the senior official after meet the entrepreneurs today (09/13) at his office. US commerce data showed, 30 percent of American companies plans to  move their plant outside China.

The Southeast Asia’ largest economy targets at least 10 percent of the companies choose Indonesia as a new place. Coordinating minister for maritime affairs, Luhut Binsar Pandjaitan told reporters, about a fifth of US companies in China are considering moving some or all of their production abroad to overcome trade tensions

About 40 percent of companies say a rise in US’ tariffs will have a strong negative impact on their business and a others say an increase in levies from China will cause the same thing, the survey said.

It also reported their main strategy to deal with tensions is to restructure operations. One of them by relocating the factory to emerging markets, especially in developing Southeast Asian and Latin American countries.

So far, the effects of trade disputes have been largely financial, with companies seeing a decline in demand, an increase in costs and a decrease in profits and revenues, the survey reported.

Capturing that opportunity, Indonesia, said Pandjaitan, tried to promote itself as a favorite choice. But they, the minister adds, still doubted Indonesia’ regulations were less friendly. He noted, they wants more stable harmonization of regulations and tax incentives, in addition to a conducive social environment.

“I assured them that the government is speeding to solve all of that,” he said, referring to President Joko Widodo’ commitment to setting investor-friendly rules.

He said Widodo had instructed ministers to revise 72 regulations that hampered the investment climate and would be finalized later this month. Days ago, the head of states urged his staff to immediately cut the red tape to attract more investment enter the country.

For that, he asked his minister to cut investment licensing processes that are procedural and convoluted. The president also wants Indonesia to be able to compete with other countries whose investment licensing processes are much faster and simpler.

“They were very enthusiastic to hear that and said Indonesia would be prioritized if the regulations and social environment were competitive with investment-friendly countries such as Singapore and Thailand,” said president.

Previously, head of the Investment Coordinating Board Thomas Trikasih Lembong, said Indonesia is utilizing United States (US) and China trade war to grab new investment. In the first half of 2019, the country’ realization investment rose 9.40 percent to Rp395.6 trillion (US$28.06 billion) compared to same period in 2018 of Rp361.60 trillion.

Currently, he continues, Indonesia was negotiating with various companies to relocate their factory from China to Indonesia. One company has responded to the invitation is the Apple iPhone maker, Pegatron Corp., from Taiwan.

The company aimed to relocated its factory to Batam with an investment of US$40 million. This factory will export goods of around $1 billion in starting 2021-2022.

Former minister of trade added that iPad manufacturer, Taiwanese Apple supplier, Compal Electronics, which is also rumored to be relocating its factory to Indonesia. Lembong said the offer of relocation occurred because China’ conditions were not conducive to labor-intensive industries.

Is known, Chinese companies experienced slowdown during US-China trade war. US President Donald Trump imposes additional tariffs on products originating from China. The Companies began to move their production chains outside of China to avoid tariffs.

The phenomenon called trade diversion causes domestic shocks, especially companies that are unable to operate because the impact of trade competition turns out to benefit several countries.

Reportedly, importers from China are also looking for other countries as partners other than US. State countries such as Vietnam, Chile, Argentina, and even Malaysia have been positively affected by trade wars.

President Widodo itself has seduce foreign investors as Indonesia grapples with the low level of foreign direct investment and the spread of current account deficit. Within, a few months after his victory, he got a number of new agreements with a number of foreign partners, including printing the largest international investment in more than five decades.

US$1: Rp14,100

Written by Lexy Nantu, Email: lexy@theinsiderstories.com