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IMO's article: Euro crisis may boost RI investment

The creation of the European Union (EU) saw one of the strongest and most integrated unions ever created in the world

The Jakarta Post
Mon, January 16, 2012

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IMO's article: Euro crisis may boost RI investment

T

he creation of the European Union (EU) saw one of the strongest and most integrated unions ever created in the world. However, in 1993 none of the members of EU foresaw that they would be in such a debt crisis as they are now.  No EU member was prepared for this situation.

At the same time, Indonesia survived the financial crisis of 1997-1998. Now, since two-thirds of Indonesian GDP is domestic consumption the crisis in the eurozone has not overly affected Indonesia’s economy but recently the EU has been planning to revoke and review the Generalized System of Preferences (GSP) that has so far favored Indonesian exports.

With BUMN (state-owned enterprises), Indonesia needs to ensure that the local economy will prosper in order to be able to contribute more to solving the crisis faced by European countries, by ensuring that the local investment climate is functional and supportive of local business, supporting small to medium-sized enterprises, encouraging new enterprises to grow and creating an effective bureaucracy.

In the middle of December 2011, Indonesia received a BBB investment grade from investment-rating organization Fitch Rating. This is a good start for Indonesia. It implies that Indonesia is a good-enough country for investment since it offers low risk and the repayment of debts is guaranteed.  This increase in quality of investment was celebrated by BUMN.

BUMN took out a two-thirds page advertisement in a local newspaper. Even though the advertisement did not come directly from the government of Indonesia, this is good news for Indonesia. BUMN wanted to deliver a message that our country would gain a lot of advantages from an increase in capital inflow and foreign direct investment (FDI).

Proportionately, borrowing costs will become cheaper; it will attract investors to Indonesia and ultimately will lead to economic growth. In this situation, the leadership of BUMN is needed to improve the investment grade. BUMN can start doing this by motivating and cooperating with local business to create greater output.  

In China, state-owned corporations have become the engine of its economic growth and development. Indonesia should follow what China has done in order to boost our economy. Our neighbor Malaysia has left us behind in attracting FDI regionally. BUMN has ensured that the local investment climate is conducive.

It is important to realize that money that is trapped in the crisis zone will need to be allocated somewhere for a greater profit. With the BBB investment grade, Indonesia can be the solution.

Indonesia has great human resources potential. With a good investment environment, it should not be hard for Indonesia to attract capital to our country.

Indonesia can do this with the leadership of BUMN to sustain the good investment environment that we already have. Indonesia will be on the way to being a reliable country for investment.

Katherine Rut Nastiti
Jakarta

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