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Indonesia Foreign Direct Investment

In: Business and Management

Submitted By syahrizka
Words 278
Pages 2
According to the Indonesia Investment Coordinating Board, in the first half of 2015 capital expenditure on greenfield projects by foreign companies rose by some 62% year on year. In addition, in the last couple months, the government has launched six investment reform packages to ease the path for foreign investors looking to enter the Indonesian market, includes a new tax holiday scheme and plans for significant deregulation of key industries such as manufacturing, trade and agriculture.
However, there are several remaining barriers that can be challenges both in the short term and long term foreign investment. First, regulations and policies. A lot of foreign investors worry about the length of time and the number of agencies that they have to deal with to obtain the necessary business permits/licenses. There are also many regulations that foreign investors are not necessary. Such complaints contributed negative perception to Indonesia investment environment. Second, the central bank’s decision to ban foreign currency transactions as of July 2015 makes companies’ financial planning more complicated. The central bank is prohibiting foreign currencies from being used in domestic transaction, including US dollar, to prevent Rupiah from depreciating.
In addition to two reasons above, foreign investors also concern about worker productivity that is not keeping up with wage growth. Indonesia wage growth might be the fastest in Asia (12% per year), but productivity only improved around 4% per year. Other factors that make investors wary is Indonesia’s legal system and corruption, which is ongoing problems that need to be resolved soon. Overall, many analysts think that it will take, at least, a few years before there is a notable improvement in Indonesia foreign investment

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