THURSDAY, March 28, 2024
nationthailand

Plenty of opportunity for Thai investment in Indonesia, panel reveals

Plenty of opportunity for Thai investment in Indonesia, panel reveals

Thai investors have been urged to seek business opportunities in the sizeable Indonesia market by setting up joint ventures.

Among Asean countries, Indonesia is ranked in a good position in many areas such as economic size and growth, political stability, the government’s economic-stimulus policies, and stock-market performance.

Availability of a variety of resources and cheap labour are also interesting factors.

Though the growth estimate for Indonesian gross domestic product in 2015 is 4.79 per cent, lower than the 7 per cent expected earlier, this iss better than Thailand’s performance.

The National Economic and Social Development Board forecasts that Thai GDP this year will grow by 2.8-3.8 per cent.

This year, Indonesia’s GDP is forecast to grow by 5.2 per cent, according to the country’s research houses.

Having around 255 million people or one-third of Asean’s population seems to be a selling point for wooing foreign director investment.

"There is a large opportunity to do business in Indonesia, as the country’s economy is 55 per cent driven by domestic consumption," Nithivadee Manikul, minister and deputy chief of mission at the Thai Embassy in Jakarta, said at a panel on business opportunities in Indonesia.

The panel was held by the Stock Exchange of Thailand during a media visit to the Indonesia Stock Exchange.

She and other speakers agreed that given the size of its market, setting up a factory there was worthwhile rather than exporting bulky products to the country.

Nithivadee said the factors that made Indonesia attractive were the fact that 70 per cent of its population would be aged in the range of 27-29 years three years from now, large coal reserves, and political stability.

Its government has tried to set up a one-stop service centre to make it easier for foreign investors to do business, she said.

Foreign firms can be granted a licence within three hours, but this is limited to companies with an investment budget of no less than US$7.3 million (Bt261 million) and intention to hire more than 1,000 Indonesian workers.

Because of a lack of infrastructure, the government has tried to expedite spending on such projects as high-speed railways and subways.

Labour costs in Indonesia are still low, as the minimum monthly wage is about $138, compared with $390 in Thailand.

Many Thai companies in such sectors as financial, energy and consumer products have forged ahead to invest in Indonesia, apart from big names such as Banpu, Siam Cement Group (SCG), Charoen Pokphand and Bangkok Bank.

Nithivadee said Thai investors had so far invested mostly in the islands of Java, Sulawesi and Sumatra. Sulawesi is a logistics hub and suitable for agricultural products, fishing and tourism. Meanwhile, Java is focusing on becoming a labour-intensive area.

"There is a lot of opportunity there, but it’s not easy. We will have to undertake a feasibility study. It would be better to get in there via the joint-venture model or by seeking local partners," Nithivadee said.

SCG, Thailand’s largest conglomerate in the building and construction materials group, has put most of its Asean investment in Indonesia, accounting for Bt40 billion or 40 per cent of its total investments. Vietnam ranks second.

Sathit Yindeepit, president director of SCG Indonesia, said the company had resumed investing in Indonesia since 2011, after a hiatus following the 1997 financial crisis.

Its business there is in chemicals and packaging products.

SCG’s Indonesia unit was incorporated in 1994 and now has more than 7,000 employees, of whom 100 are Thais.

The company also operates a cement plant with production capacity of 1.8 million tonnes a year to serve higher demand for cement partially derived from a subway-train project.

Sathit warned that labour might be as cheap as before.

However, the company would continue to invest in Indonesia this year by focusing on the chemical and construction-material sectors via joint ventures.

"This year, we will invest more in foreign countries, now amounting to 20 per cent in Asean, and expect that proportion will hit 50 per cent in the future," he said.

Kirana Limpaphayom, senior vice president of ITM, the flagship of Banpu in Indonesia, said the company was still going ahead with its coal business there even though the global coal price is falling.

"This country is still attractive, but it depends on which area the company will diversify into," he said.

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