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Indonesia – Low labour costs and political stability boosting foreign investment

05 March 2014

Indonesia plans to lure investments from companies from Japan and Europe, as political turmoil to Thailand and rising wages in Malaysia boost the attractiveness of the Southeast Asian country, reports the South China Morning Post.

Mahendra Siregar, Chairman of the Indonesia Investment Co-ordinating Board plans to visit Japan, South Korea, China, the United States and Europe to promote industrial zones in central and east Java.

The perception that Indonesia is now politically less risky and cheaper than some neighbours is adding to the allure of the world's fourth-most-populous nation. The nation has overtaken China and India as the most promising country for Japanese companies for business development, according to a Japan Bank for International Co-operation survey.

Wellian Wiranto, an economist at Oversea-Chinese Banking Corp., commented: "Indonesia's appeal includes a sizeable labour force and consumer market. Indonesia has its own share of political uncertainties ahead of elections, but they must look negligible compared to the drama playing out in the streets of Bangkok."

At least 23 people have been killed in Thailand since anti-government protests began in late October.

Kenichi Tomiyoshi, President Director at the Jakarta office of Jetro (Japan External Trade Organisation), commented: “Labour costs are another advantage for Indonesia. Medan, the country's fourth-largest city, will benefit from the introduction of minimum wages in Malaysia last year as it offers a cheaper workforce and is less than an hour's flight from Kuala Lumpur.”

Mr Siregar added: “Japanese companies will choose Indonesia to be near their markets.”

“Indonesia's foreign-direct investment rose by +22% last year to IDR 270.4 trillion (USD 23.3 billion), with Japan the biggest source at about USD 4.7 billion, for a 16.5% share compared with Singapore's 16.3%. Total investment from domestic and overseas sources this year may grow by +15% to about IDR 456 trillion (USD 39.3 billion), after rising by +27% last year,” Mr Siregar said in January.

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