I'nesia to be major trade, investment player
Play
Thai companies told of competition, cooperation under AEC
Indonesia will be both an important market and a competitor for trade and investment under the Asean Economic Community, so Thai businesses should prepare for this now, advises a unit of the University of the Thai Chamber of Commerce.
A study by the UTCC’s Centre for International Trade Studies (CITS) found that Indonesia had the highest potential among Asean countries for trade and investment after the AEC comes on stream in 2015.
With its huge population, plenty of land, strong economic expansion, and wealth in natural resources, every foreign nation, inside and outside Southeast Asia, will focus more on that country.
CITS director Aat Pisanwanich said Thailand needed to draw up clear strategies and programmes to promote more trade and investment in Indonesia. Thai businesses should also forge closer cooperation with their counterparts in that country so that they can grow together.
The centre’s study found that Indonesia would become Asean’s largest recipient of foreign direct investment (FDI) after 2015. Currently, it is the second-largest investment destination in Asean after Singapore.
Indonesia will be attractive to foreign investors because of its large population and rising consumer demand. The country also has many other advantages such as cheap labour, strong economic growth and stable politics, while fuel costs are also quite low.
Aat said that at present, only large Thai enterprises invested in Indonesia. The Thai government and its agencies should encourage more small and medium-sized enterprises to invest there.
He suggested that the government provide in-depth information about the country. It should also provide soft loans and market-penetration strategies, as well as advice about Indonesian rules and regulations affecting Thai investors.
Study urged
“So far, only large Thai enterprises can invest in Indonesia because of lack of support from the government. The Thai government and investors should urgently study Indonesia deeply so that they can ensure competitiveness when they penetrate this market,” Aat said.
According to the CITS, interesting sectors for Thai export to Indonesia are food – especially processed food including fruits, sugar, and cereal products with attractive packaging – toys, electrical appliances, and automobiles and parts.
Sectors with strong potential for Thai investment are transport, storage, communication, construction materials, mining, metal and machinery, food, rubber and products, aquaculture manufacturing and fishery, and motor vehicles and transport equipment.
Currently, most FDI goes into Java, but after 2015 investment will spread to other islands such as Sumatra, Kalimantan and Sulawesi, the CITS believes.
Although Indonesia ranks only 122nd for ease of doing business as rated by the World Bank, it has cheap labour and low rents.
Indonesian labour is the cheapest of the five original Asean member states, but higher than in Cambodia, Laos, Myanmar and Vietnam. The average cost of Indonesia labour is Bt4,200-Bt4,500 per month.
Fuel is also quite cheap at Bt32.10 per litre for diesel and at Bt29.10 a litre for 92-octane petrol.
Aat also advised investors interested in Indonesia to be aware that it is prone to natural disasters. According to statistics, between 1980 and 2010 the country faced six droughts, 76 earthquakes (2.45 times a year on average), 118 floods (3.81 times a year), and 36 volcanic eruptions (1.16 times a year).
