President Susilo Bambang Yudhoyono’s official visit to Australia was symbolic as well as critical in enhancing ties between Indonesia and its neighbor. Australian companies have played an important role in developing Indonesia’s mining, banking and food sectors, while Australian universities have long attracted Indonesian students.
As Yudhoyono noted in a speech to Australian business leaders on Thursday, the final day of his visit, enhancing economic and trade ties represents an opportunity for Australian companies to invest in Indonesia. He spoke especially about the need to develop eastern Indonesia, which has seen less investment compared to other regions.
A special emphasis was placed on the need for investment in six provinces in the eastern region, which is geographically closer to Australia. They are Papua, West Papua, Maluku, West Nusa Tenggara, Bali and East Nusa Tenggara, which includes West Timor and is positioned near the oil- and gas-rich Timor Sea.
Around 400 Australian companies currently operate in Indonesia, including those in the mining, construction, banking, transportation and food and beverage industries. Indonesia also has the Asia-Pacific region’s largest proven natural gas reserves.
Yudhoyono is absolutely correct in highlighting eastern Indonesia as a possible investment destination for Australian firms. The relatively undeveloped but resource-rich region could conceivably be a gold mine for businesses with the necessary courage, foresight and risk appetite.
The president’s call shows the government’s openness to foreign direct investment, which Indonesia needs over the next few months to boost gross domestic product growth to above 7 percent. In fact, it is estimated that the country will require more than $30 billion in FDI to complement domestic investment.
But foreign investment needs to go hand in hand with receptive government policies, something that has not happened to this day. Investment regulations that restrict FDI and the issuance of a negative list send mixed signals to potential investors. The country’s dizzying attempts to decentralize power have also resulted in overlapping regulations, more cases of red tape and counterproductive levies and taxes.
There is also a need for government agencies to coordinate their policies better. While the trade and investment ministries are wooing investors, others like the Education Ministry are doing the opposite. The new regulation issued this week on international schools, for example, sends the wrong signal to foreign investors. Foreign companies will not invest in Indonesia unless their employees are assured that their children can go to international schools that offer a global-standard education.
The government must adopt a wholistic approach to foreign investment. Every policy that could impact the foreign community must be carefully thought through.
Source: http://www.thejakartaglobe.com/opinion/editorial-australias-role-vital-to-indonesian-growth/363360
