Indonesia’s 2023 ASEAN chairmanship, taking place a year after it hosted the Group of 20 Summit, has showcased the archipelago’s eagerness to play an even larger role in Southeast Asia as well as the global economy.
Alongside showcasing Indonesia’s capabilities and leadership skills, the ASEAN Summit also presents an opportunity to attract foreign investment into Indonesia by showcasing its strength in natural resources, refined systems and resilience during the global recession.
Data from the Investment Ministry/BKPM shows that Indonesia saw its foreign direct investment (FDI) increase by 44.2 percent to US$ 45.6 billion in 2022, with aims to increase its foreign and domestic investment target to US$92 billion in 2023 by relying on the country’s abundance of natural resources and a large domestic market that offers high potential for long-term investment opportunities.
During the 15th edition of the JakPost Spotlight webinar, which took the theme of “Riding the wave of Indonesia’s ASEAN Chairmanship 2023 to encourage investment”, the Investment Ministry’s deputy minister for investment promotion, Nurul Ichwan, explained that ASEAN member countries’ respective policies were closely correlated with attracting investment to the region.
Despite the decline of FDI in 2020 due to the COVID-19 pandemic, the 2022 ASEAN Investment Report showed that the numbers had slowly picked up for all ASEAN member nations since 2021, cementing the region’s place as a major FDI destination in the developing world and its expectations to become a vital instrument in driving the global economic recovery.
Ichwan noted that articles from the Job Creation Law that were not supportive enough of a sound investment climate were being revoked and replaced with investment-friendly laws.
“The reactions coming from investors are very positive. They appreciate [our efforts] and highlighted improvements that make it easier to do business in Indonesia with faster procedures in obtaining licenses. In addition, economic policies related to the government provide guidelines for investors as a priority government agenda will be followed by incentives,” he said.
Lintang Paramitasari Parnohadiningrat Wibawa, secretary for the Team for the Advancement of Economic Recovery at the Foreign Ministry, said the upcoming ASEAN Summit, to be held from Sept. 5 to 7, would serve as a testament to the hard work Indonesia had been doing throughout the year.
“For the ASEAN Summit, we hope that there will be a leaders’ declaration called the ‘ASEAN Leaders’ Declaration on ASEAN as an Epicentrum of Growth’ that will showcase the commitment of the leaders in advancing economic growth for the region, especially after the pandemic,” she said.
One of the issues covered in the document would be investment, Mita said, highlighting the importance of robust trade conditions and a conducive investment environment in attracting sustainable and high-quality investment into the region.
David Fernando Audy, legacy lead ASEAN business entity operating partner at East Ventures, said an expanding population, increasing liberal trade policies and peaceful political stances had resulted in faster than average GDP growth in Southeast Asia.
David at Riding the wave of Indonesia’s ASEAN Chairmanship 2023 to Encourage Investment
The International Monetary Fund (IMF) forecast for global growth is 2.7 percent for 2023, while ASEAN is forecast to grow substantially faster at 4.7 percent.
“ASEAN economies have been increasingly attractive as FDI destinations in recent years as multinational corporations are increasingly looking at Southeast Asia as a production hub, attracted by competitive wages, improving business regulations and infrastructure and increasing domestic demand,” he said.
David also said that while almost all sectors of the economy were attractive for investors, the focus should be on the most needed, such as digital transformation, food and health resilience, and trade and investment facilities.
Adding to David’s explanation, Mita cited data from the ASEAN Secretariat on three investment trends in the region, with the first being digital transformation, followed by the green sector and the electric vehicle (EV) industry.
With geopolitical conflicts arising around the globe, Ichwan explained that investors also considered variables aside from economic policy when making a decision, such as the social, political and cultural aspects of a country.
Political stability, he continued, plays a very significant role in influencing investment decisions, with ASEAN being one of the most stable regions despite some internal conflicts in member countries.
“This is the time for Indonesia, with its chairmanship of ASEAN, to give suggestions and invite countries with instability to change their situation […]. We need to move together in the spirit of ASEAN so that no member countries will be left behind,” he concluded.
The original article was published on The Jakarta Post, 24 August 2023.