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Euro firms hoping to expand outside Java

In a never-before-seen trend, European senior business executives are aiming to expand to outside Java in the next 12 months, a recent survey by the British Chamber of Commerce in Indonesia (BritCham) has found

Khoirul Amin (The Jakarta Post)
Jakarta
Fri, February 5, 2016

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Euro firms hoping to expand outside Java

In a never-before-seen trend, European senior business executives are aiming to expand to outside Java in the next 12 months, a recent survey by the British Chamber of Commerce in Indonesia (BritCham) has found.

The survey, '€œJoint European Business Confidence Index 2015'€, has found that Sulawesi and Sumatra are the two most common destinations for expanding European firms this year.

Surveying 170 European business owners affiliated with BritCham and other European chambers of commerce from Nov. 19, 2015, to Jan. 11, 2016, the survey shows that more than one-fourth of respondents plan to expand their businesses this year, with 30 percent planning to expand to Sulawesi and 24 percent to Sumatra.

Surabaya and other cities in East Java, which used to be the most favored destinations, were on the radar for just 15 percent of respondents in the recent survey.

'€œIt is very clear that many businesses are working toward regionalization,'€ said BritCham chairman Adrian Short.

At the launch of the survey results, Short said that the finding had demonstrated an increased interest in expansion beyond Java, which was the top destination

in the 2014 survey.

He suggested that development of cities in the regions was an attracting factor for investment.

While the survey does not unveil any specific sectors in which expansions are set to be carried out, it has found that most European executives see a very positive outlook for infrastructure and construction as well as the hospitality, travel and tourism sectors this year.

German Ambassador to Indonesia Georg Witschel has previously told The Jakarta Post that German businesses are expecting major progress on large petrochemical projects in Papua and are aiming to make a significant contribution to Indonesia'€™s 35-gigawatt (GW) power generation program.

'€œ[...] and also to its railway and maritime infrastructure,'€ he stated in an e-mail.

Investment Coordinating Board (BKPM) head Franky Sibarani said that the government aimed to enlarge the portion of investment flowing outside Java to 49.1 percent this year from 45.2 percent of total investment'€™s last year.

The Industry Ministry has also earmarked 14 areas outside Java to be developed into industrial zones, including Morowali in Central Sulawesi, Konawe in Southeast Sulawesi, Kuala Tanjung in North Sumatra and Tanggamus in Lampung.

UK Ambassador to Indonesia Moazzam Malik said on Wednesday that while most European investors were still optimistic about the future of Indonesia'€™s economy, there were still several challenges facing the expansion of investment coming from overseas.

According to the survey, top challenges for European firms in doing business in Indonesia last year were bureaucratic inefficiency, the regulatory environment and labor policy.

The number of respondents highlighting challenges in the forms of a lack of skilled labor, a lack of infrastructure and corruption issues, meanwhile, dropped significantly by 17 percent, 21 percent and 17 percent, respectively.

Short said that European business players were welcoming and confident in response to the government'€™s economic stimulus packages, but they would like to see the implementation.

As many as 48 percent of the survey'€™s respondents were uncertain that the stimulus packages would improve the business environment and 58 percent were uncertain that the packages would be properly implemented.

'€œ[However], as the survey took place toward the end of last year, a number of packages weren'€™t yet fully implemented or fully announced [...],'€ Short explained.

The European business confidence index in Indonesia dropped to 50 percent last year from 71 percent in 2014, largely due to a slowing economy, according to the survey.

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