[Note: This article was published by The Korean Times on Monday, April 24 2017]. by: Saudaranta Tarigan
Lately, many Korean business groups, entertainment and tourism sector face increased pressure from China’s government, as a consequence, they are now stepping up searching for alternative to relocate their capital or expand their current market. Whatever the strategy the Korean business players may take; there are many good reasons to consider Indonesia as a place for investment now. Most international businesses and investors, including Korean business, know well that Indonesia has attractive demographic profiles as, the world’s fourth most populous, young, urbanizing, increasing consumption and a wealth of natural resources. But far fewer understand how to approach and to invest in this very dynamic growing nation. Amid general concerns among foreign investors, including Koreans, about excessive bureaucracy and corruption, access to capital, and infrastructure bottlenecks in Indonesia, I would say that those concerns are now being addressed seriously by the current administration — under President Jokowi.
From September 2015 to January 2017, the government unveiled 14 economy policy packages of reforms and 2 packages of legal reform as a part of government efforts to attract investors; and soon more packages to be released. As of now, it opened additional 35 sectors to foreign ownership, eliminated or simplified various regulations, improved procedures, and accelerated business licensing, etc. Those recent reforms are designed to diversify growth sources and address the issues that became growth constraints for Indonesia economy.
Here are some of reasons for Koreans investors to invest to Indonesia :
First, Indonesia economic and legal Reforms, Indonesia is currently categorized as a top reformer in the 2017 the Ease of Doing Business (EODB) report. The 14 economic policy packages that have been released aimed at boosting competitiveness, employment opportunities, purchasing power, investment and overall macroeconomic growth. Despite, some pessimistic scenario predicted by some critics of those reforms, the reforms have already gained a positive impact on investor perceptions as Indonesia’s ranking in EODB index for 2017 has climbed 15 places to 91 within a year. Apparently, the Indonesia government set forth a higher target for 40th place on the World Bank’s EODB index in 2018. One form of corruption in Indonesia that makes doing business in Indonesia complicated and costly is the levying of illegal fees by government officials. To tackle this problem, last October the President launched a special nationwide task force to tackle frustrating illegal levies, called “Saber Pungli,” a program to fight illegal levies at the public services and licensing agencies. Although, it is still long way to go for abolishing this red-tape and illegal levies, but the government make it clear that it fights against this problem seriously. Moreover, the central government has also removed 3,143 problematic regional government regulations (Perda) last year as a part of the reform efforts of bureaucracy. The Indonesian Government also focused in reforming its tax and customs service sector. As expected, the government also sets to launch the 15th economic policy package on logistics for creating efficient and low-cost logistics environment in Indonesia soon.
Second, Indonesia – Korea on Comprehensive Economic Partnership Agreement (IKCEPA), although Korea-ASEAN FTA has entered into force since 2007 but Indonesia and Korean government realized that a stronger bilateral FTA would have a positive effect on both economies. The signing of IKCEPA – which has gone through up to the seventh round of talks, but some sticking points still remain unsettled — will definitely set out the principles, future direction and framework for the mutually beneficial cooperation between the two countries. Although the negotiation between Indonesia and Korea has not reached a deal after nearly two years of negotiations, however, the talks may resume, any time, again when both parties come up with new modalities and win– win situation.
Third, positive image on Korea-related products, the Korean Wave “hallyu” which was initially from music industry has been extended to drama, movies, dress styles, clothing, Korean foods and electronic devices has become a trend in Indonesia. Koreans and Korean companies enjoy a “very” positive image among Indonesian especially young generations. In the past, especially during 1990s Korean investments in Indonesia poses several problems caused by the industrial sectors when the local mass media in Indonesia were busy covering the incidents of labor conflict occurring in the Korean companies. The writer recalled back on several occasions on conversation with some friends who worked for Korean companies in Jakarta confirmed those some negative experiences. That negative images of Korean companies and work conditions – put the Korean companies at the bottom of list priority.
Thanks to Korean Wave that promotes and makes any Korean products and services as well as Korean companies as working places at high priority.
As the largest economy among ASEAN member, with more than 250 million populations that accounts for nearly 42 percent of the population within the ASEAN market, with this positive image of Korea, Indonesia is the best base for Korean Products and services to enter ASEAN market.
Fourth, Past and Future Trend Relationship between Indonesia – Korea, the Korean companies have actively pursued business opportunities in Indonesia since early 1960s even before the diplomatic relations between the two countries was established in 1973. For over 4 decades, Korea and Indonesia have enjoyed an increasingly robust economic relationship with no record ever that indicated Indonesia taking any economic retaliations against Korean business due to domestic and foreign policies taken by Korean government. This stable and mutually respected relationship between the two countries is strong foundation for future relationship between Indonesia and Korea. Although, the future trend of relationship will be determined by many factors, but the two countries may develop strong cooperation through investments on some important sectors such as: (1) infrastructure development and (2) e-commerce industry – as Indonesia presents much opportunity for e-commerce among other emerging Asian economies. It is obvious that there are still many “home works” that the Indonesian Government needs to work on for a better place of investment. As the reforms to continue done by government of Indonesia, and by structuring business strategy based on understanding of legal matters and cultural background of Indonesia, Korean investors will make a difference in Indonesia.***