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Asian companies push entry into RI for ASEAN single market

As Asian businesses brace for a single market in the 10-nation ASEAN at the end of this year, Indonesia has been picked as one of the most favorite hotspots for investment

Linda Yulisman (The Jakarta Post)
Jakarta
Mon, June 8, 2015

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Asian companies push entry into RI for ASEAN single market

As Asian businesses brace for a single market in the 10-nation ASEAN at the end of this year, Indonesia has been picked as one of the most favorite hotspots for investment.

A large number of Asian firms have expressed interest in expanding business or setting up new facilities in Southeast Asia'€™s largest economy, partly to tap into the lucrative benefits promised by the deeper economic integration in the region that hosts a population of 620 million.

Dozens of firms from Japan, South Korea, Taiwan and China have committed to pour around US$7.9 billion in investment into Indonesia, covering a wide range of business sectors, including manufacturing, from October last year to early June, the Investment Coordinating Board (BKPM) has revealed.

The establishment of the Southeast Asian marketplace is indeed the main trigger that spurs direct Japanese investment into Indonesia, according to Yoshida Susumu, the secretary-general of the Jakarta Japan Club (JJC).

'€œFrom the manufacturing viewpoint, like from the automobile, machinery and electric appliance industries, a supply-chain network will be forged in this region and thus production will be expanded in the long run,'€ said Susumu, whose organization represents more than 500 Japanese firms in Greater Jakarta.

'€œJapanese manufacturing is strengthening Indonesia as a production base, aiming to drive exports to third countries.'€

Japanese companies'€™ exports from their manufacturing facilities in Indonesia to other areas, including Southeast Asia, are much higher than shipments to Japan, a survey carried out by the club early this year showed.

Another survey by the Japan Bank for International Cooperation (JBIC) last year pointed out that an abundant labor force and the ongoing formation of a strong supply chain were the key drivers that attract Japanese investment into Indonesia, in addition to the huge and fast-growing domestic market.

While Japanese firms '€” particularly automakers Toyota, Daihatsu, Honda and Suzuki '€” have had strong footholds for a long time, other Asian firms have already followed suit.

The world'€™s seventh biggest tire maker, Hankook Tire of South Korea, is operating a tire plant in Indonesia that serves as an export hub to many regions, including Southeast Asia, while Taiwanese tire makers Maxxis and Kenda will soon begin construction of their factories here with completion scheduled within two years.

'€œWithout doubt, the upcoming ASEAN single market is one of the top considerations that drives more of Taiwan'€™s investment here,'€ said YC Tsai, the director of the economic division at the Taipei Economic and Trade Office (TETO) in Indonesia.

'€œAny company neglecting the ASEAN economic community'€™s potential in the global economy could miss the best chance to position itself well in future development,'€ he added.

This was confirmed by a survey by Taiwan'€™s think tank, the Chung-Hua Institution for Economic Research, which revealed that Taiwanese firms are now considering or adopting the so-called '€œASEAN Strategy'€ with a bigger focus on Southeast Asia as a way to cope with a less favorable investment climate in China, as well as to benefit from the integrated regional market.

Indonesia is among the top investment destinations, along with the Philippines and Vietnam, it says.

The massive investment planned by Asian firms into Indonesia as a way to tap into the $2.4 trillion economy of ASEAN, the world'€™s seventh biggest market, is in line with the future trend predicted for many other firms worldwide.

Indonesia is cited as the most preferred destination for manufacturing investment by multinational companies over the next five years, along with Myanmar, as they race to take advantage of the integrated market, according to a Baker & McKenzie report early this year. The number of factories is expected to surge by nearly 70 percent over the period, the report notes.

BKPM deputy chief for investment monitoring and implementation Azhar Lubis said that attracting investment from Asian firms would be one of Indonesia'€™s main priorities in the future.

'€œAsian investments have accounted for 55 percent of our net stocks of foreign direct investment [FDI] from 2010 up to the present. In the future, we will focus our promotion efforts in Asia to generate more interest,'€ he said.

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