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Businesses urged to invest in Indian Ocean region

The government has called on domestic business players to invest in the Indian Ocean region to benefit from abundant untapped business opportunities as well as help boost exports

Stefani Ribka (The Jakarta Post)
Jakarta
Sat, March 4, 2017

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Businesses urged to invest in Indian Ocean region

T

he government has called on domestic business players to invest in the Indian Ocean region to benefit from abundant untapped business opportunities as well as help boost exports.

Investment Coordinating Board (BKPM) head Thomas Lembong expects businesspeople to work on potential partnerships with prospective counterparts during the Indian Ocean Rim Association (IORA) Business Forum on March 6.

“One of the most realistic ways to jack up exports of some commodities is to invest in respected countries,” Lembong said Friday during the press conference on the event. “Investments could be in the form of warehouses, trading firms or factories, these will be the spearhead to open market access.”

Lembong pointed out paper products as an example of how investment in warehouses and trading firms in Iran helped increase exports significantly, allowing Indonesian paper and packaging items to control 70 percent of the market in IORA member nations.

The investment board also called for producers of consumer goods and pharmaceutical products to channel investment into other developing countries in the region in the hope that such a move would benefit the Indonesian economy.

“Besides increasing exports, building pharmaceutical facilities in India can reduce our dependence on imported medicine ingredients from China or India and also lower costs,”
Lembong said.

Established in 1997, IORA currently has 21 member nations, which have a combined population of 2.7 billion, or 35 percent of the world’s market.

The members comprise countries in Africa, the Middle East, South Asia and Southeast Asia, such as South Africa, Mozambique, Madagascar, Kenya, United Arab Emirates (UAE), Yaman, Bangladesh, India, Sri Lanka, Singapore and Thailand.

Total trade among IORA countries reached US$777 billion in 2015, more than triple the figure seen in 1994.

Indonesia is set to host the organization’s first leaders’ summit on Tuesday together with the Business Forum, preceded by a ministerial meeting on Monday.

Trade Minister Enggartiasto Lukita said the selective outbound investment would be one of the ways to improve exports in IORA countries, which were mostly non-traditional markets for Indonesia so far.

Enggartiasto also said that apart from efforts by businesspeople, the ministry would also approach the United Arab Emirates, South Africa, Bangladesh and Iran as well as participants from non-member countries, such as the US and the UK, to explore opportunities for making bilateral or multilateral trade pacts in a bid to increase Indonesia’s exports.

Indonesian Chamber of Commerce and Industry (KADIN) vice chairman for international relations Shinta Kamdani said outbound investment was ongoing in some countries and had pushed up exports markedly. However, she warned that the move should be carried out carefully to ensure the nation received benefits.

“We really need to be extra careful to ensure that our exports really benefit from investment there, one way to do this is by using raw materials from Indonesia or investing only in trading firms or warehouses instead of factories,” Shinta said.

Some Indonesian firms under KADIN are in the process of setting up joint trading firms with their counterparts in IORA countries to help local products expand into non-traditional markets.

University of Indonesia economist Ari Kuncoro, however, said that boosting exports through investment might not be the best option for Indonesia at present, considering that Indonesia was not yet an industrialized country.

“The best way to enhance exports is to ship our products directly [to these countries],” he said.

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