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Foreign investments flow to neighbors instead of Indonesia: World Bank
“Businesses are moving out of China but are not coming to Indonesia because Indonesia’s neighbors are more welcoming,” reads a slide from the World Bank presentation material conveyed to President Joko “Jokowi” Widodo last week, a copy of which was obtained by The Jakarta Post.
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ndonesia is struggling to attract foreign investments, which are instead going to neighboring countries such as Vietnam and Cambodia as they embark on deregulation and policy solutions, according to the World Bank.
“Businesses are moving out of China but are not coming to Indonesia because Indonesia’s neighbors are more welcoming,” reads a slide from the World Bank presentation material conveyed to President Joko “Jokowi” Widodo last week, a copy of which was obtained by The Jakarta Post.
“Moving factories from China to Indonesia is risky, complicated and would take at least one year if not more, while the process is certain and much shorter in Vietnam, Thailand, Malaysia, Singapore and Taiwan.”
Indonesia’s net foreign direct investment (FDI) inflows only accounted for 1.9 percent of gross domestic product (GDP) last year, compared with 11.8 percent booked by Cambodia and 5.9 percent by Vietnam, the bank’s data show.
Between June and August 2019, 33 Chinese companies announced plans to set up or expand production abroad, of which 23 are going to Vietnam and the remaining 10 to Cambodia, India, Malaysia, Mexico, Serbia and Thailand, according to the World Bank.
The data highlighted Indonesia’s relative inability to capture one of the silver linings of the ongoing trade war between the United States and China, namely the possibility of factory relocation from the latter to circumvent tariffs imposed by the US on Chinese goods.
The Washington, DC-based lender highlighted lengthy procedures businesses must endure to operate in Indonesia as the primary reason for the lack of foreign direct investment coming to the country. Regulatory uncertainty and complex bureaucratic processes also made Indonesia less interesting than other neighboring countries.
