Why Indonesia

Investment Climate

1. Low Labour Cost

For centuries Indonesia has been developing many experienced laborers in this sector. In 2010, more than 40% of Indonesia’s total workforces of 107,405,572 are employed in the agricultural sector. Additionally, compared to other countries, even China and India, Indonesia still has a comparative advantage over labor cost.

Graphic 1. Labor Cost (2009)

2. Large Domestic Market
 

With a population of approximately 240 million, Indonesians spend up to 50.6% of their household income on food. A growing demand, both locally and globally for food, feed, fuel and fiber, places agricultural production and food security high on the national agenda.

The importance of technology supply and utilization becomes more critical in improving the efficiency and productivity of farming and food processing machines. This could be seen as an opportunity for the investors to invest and participate in research and development (R&D) programs for better food and agriculture practices in Indonesia.

3. Supporting Government Program
 

The Government of Indonesia is committed to overcoming challenges for food security by establishing food estates across the country, designed to stimulate large-scale investment in the agriculture sector and beef up food security. The developers will have some allocation towards domestic supply until the nation’s food needs have been met, before they are able to export.

One pilot project under development is located in the Eastern most province of Indonesia of Papua – where 1.6 million hectares of land in Merauke is being transformed into an integrated farming, plantation and livestock zone, where companies will grow, process and package their products in one place. Rice and corn will be the key staple commodities of the estate, with around 600,000 ha of the estate’s total being allocated for food crops.

Production is aimed at 2 million tons of rice and corn, 167,000 tons of soybeans and 2.5 million tons of sugar. Should this program be a success, Papua itself still has 2.49m ha worth of land that is suitable for future agricultural use.

Another government program aimed at diversifying food staple products is the Food Diversification and National Food Defense Enhancement Program 2010-2014 (“Program Peningkatan Diversifikasi dan Ketahanan Pangan Masyarakat”), by the Food Security Agency. The program’s aim is to promote the diversification of the production of food starch-based staples other than rice. This program gives the opportunity for investors to develop and market alternatives of new food products as a part of the food diversification.

Stronger Investment Climate

Indonesia’s economic policies are on a firm footing. So are its measures to attract foreign investment. Below are a few of Indonesia’s latest improvements to our investment climate:

For information about Investment Law No. 25/2007. please click here

This updated investment law redefines “capital investment” as all investments, whether by domestic or foreign investors, for the first time offering equal treatment to all investors. There is no longer a limit of 30 years on foreign investment permits, and gone is the provision in Law 1/1967 for there to be divestment. Additionally, the new law allows for the unimpeded reparation of capital.

One-stop-shop (PTSP) and National Single Window (SPIPISE)

BKPM has launched a one-door integrated service (PTSP) and an electronic automation platform for investment licenses and non-licensing services (NSWi) to not only reduce the number of procedures and amount of documentation needed to invest in Indonesia, but also to bypass the need to physically come to our offices to apply for certain services. The new system has revamped internal processes and rectified human resource constraints to increase the speed and improve the quality of investor services. The system was first launched in January 2010 in the Free Trade Zone and Free Port of Batam.
 

 

US companies perceive Indonesia as a potential regional hub for conducting their business and trade, Indonesia`s Trade Minister Enggartiasto Lukita stated.
Indonesia has eyed export of liquefied natural gas (LNG) to Cambodia to meet the demand for power plants in the country, Vice President Jusuf Kalla said here on Wednesday.
Indonesian Vice President Jusuf Kalla and Cambodian Prime Minister Hun Sen held bilateral talks at the Lotus Blanc Resort, Siem Reap, Cambodia, on Wednesday morning, to discuss the development of cooperation between both nations.
Economic diplomacy has become one of the priorities of the Indonesian foreign policy by boosting the country′s economic and trade cooperation with African, Central, and South American countries, Foreign Minister Retno L. P. Marsudi stated.
Indonesia and the European Union (EU) have developed relations across a wide spectrum of areas in the space of a few years as outlined in the EU-Indonesia Partnership and Cooperation Agreement (PCA). By Yuni Arisandy
Foreign Affairs Minister Retno L. P. Marsudi has called for reduction of plastic waste by using refillable bottles and reusable straws and bags.
The Center for Indonesian Policy Studies (CIPS) has stated that Indonesian banks are now stronger in facing global pressure compared to the conditions in 1998.
Finance Minister Sri Mulyani Indrawati has forecast that the Indonesian economic growth in 2018 may reach 5.15 percent, falling short of the target of 5.4 percent set in the state budget.
The European Union (EU) and Indonesia have developed cooperation agreements in various sectors in the past several years as outlined in the European Union-Indonesia Partnership and Cooperation Agreement (PCA).
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