Updated: Jun 1, 2020
Indonesia has turned a major corner in the last few months. With the last election now complete, with a solid win for Jokowi, and the new parliament (with a lot of younger faces) sworn in, a lot of observers and Indonesia fanatics are looking at what 2020 will bring. Our interest is around the foreign investments laws and any changes that may impact foreigners wishing to invest in Indonesia. Our hunch is that this second term of Jokowi is going to be very good for foreign investors. Why? Let me explain.
During the first term of government in Indonesia, the sitting President has a lot to think about and most of the time they are thinking about being elected for a second term. So their policies tend to focus on low risk growth and trying to stabilise the economy and create new jobs as well as try to deliver on their election promises. The second term is when the real changes start to happen. Under Indonesian law, a President can only be elected for 2 x 5 year terms after which they must step aside and allow someone else to try their luck. It is the second term when you see the real changes as the President is working on their legacy. What does this mean?
All humans want to be remembered for the good things they did and this certainly applies to politicians. Indonesia's are a proud people and have a history of leaders not providing the best for their people. None of them want to be remembered for their failures so they try their hardest to implement lasting changes during their second term. This guarantees that people are still talking about them long after they have gone.
Earlier this year in front of tens of thousands of people, Jokowi said: “We must invite as much investment as possible to create jobs. No one should be allergic to investment… Anything that obstructs investment must be trimmed.”
On top of this Jokowi intends to make investment easier for foreigners and will be looking at changing the rules around the Negative Investment List, and which industries foreigners can invest into as well as changing the percentages of foreign ownership in a lot of fields. This means great things if you're thinking of investing in Indonesia. Not to mention the "10 new Bali's" idea of providing attractive investment terms for foreigners that wish to invest in islands other than Bali.
If you are from Australia you're in luck as there is a new trade agreement that is being ratified very soon called - Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) - this agreement focuses on creating closer trading ties between the two countries and opens up a lot of industries that were previously closed to foreigners.
In summary I believe 2020 will be a very good year for foreign investment in Indonesia and we should see a relaxation on foreign investment laws, tax laws, red tape and many other areas that have caused headaches when investing in Indonesia. If you have any questions or would like to know more please contact us.