US, Indonesia economic ties set to strengthen

The total value of economic relationship between Indonesia and the US could reach US$131.7 billion in 2019, a 46 percent increase from $90.1 billion in 2014, according to the “US-Indonesia Investment Report 2016” released by the US Chamber of Commerce and American Chamber of Commerce (AmCham) Indonesia.

 

Economic relationship does not only cover trade and investment, but also financial flows, company sales and government revenues.

 

The prediction was made with a best-case scenario assumption that President Joko “Jokowi” Widodo achieves his goal of a staggering 7 percent economic growth by the end of his term, from 4.79 percent last year, the lowest in six years.

 

The target is possible, said US Chamber of Commerce executive vice president and head of international affairs Myron Brilliant, provided the government has the right policy mix, including transparency and a more relaxed negative investment list (DNI).

 

“There have been some important steps in the right direction in this relationship. This is the kind of thing that sends a positive message to the investment community,” Brilliant said in his speech at the annual US-Indonesia Investment Summit on Thursday.

 

The US has acknowledged that the government, for example, opened up total foreign investment for 35 sectors in February this year, including the e-commerce sector, which is expected to be a future growth sector for US investment in Indonesia.

 

It has also rolled out over a dozen economic policy packages, addressing various problems, including cutting bureaucratic red tape and decreased the number of permits required to do business in Indonesia.

 

The moves might have borne fruit. A survey conducted by AmCham Indonesia this year with US companies operating in Indonesia this year showed that more than 80 percent of the companies felt that there had been some improvement in the investment climate over the past two years.

 

As a result, the participating companies said they would invest more than $334 million over the next five years. Nine potential areas identified are: creative industries, finance, infrastructure, oil and gas, consumer goods, agriculture, extractives, pharmaceuticals and information and communications technology.

 

Coordinating Economic Minister Darmin Nasution said that although the country’s foreign direct investment (FDI) stood at $893.2 million in 2015, lower than $1.3 billion in 2014, their was a lot of untapped investment potential. The US is Indonesia’s seventh-largest foreign investor.

 

“The US will continue to remain one of Indonesia’s most important economic partners in the years to come,” said Darmin, citing the $20.25 billion in deals committed by US businesses during Jokowi’s visit to Washington late last year.