The Potency of Foreign Investment in Indonesia and Its Obstacles

Indonesia is considered as one of the ideal countries for investments. With its 261 million population and an immense of natural resources, Indonesia could be the best place for developing businesses. Year after year, economic growth in the country is increasing rapidly, which also expands the market. Those are what lure many foreign investors to invest in the country.

Indeed, FDI itself received a warm welcome from the local government. In turn, the investment has created many jobs and encourage local people to do the same. Ultimately, finances become healthier. Furthermore, the state also has the opportunity to engage in international trade, the opportunity to introduce the business climate, and build cooperation with other countries. 

But, for sure there are also obstacles. For more details, here are the underlying aspects of foreign direct investment in Indonesia.

Natural Resources

It is undeniable that the abundance of natural resources in Indonesia has attracted many foreign investors. This factor is a big advantage, both for investors and the country itself, by always providing potential prospects for various businesses. Various types of mining, such as tin, gold, coal, and so on, can increase the per capita income of the country and the rapid flow of money for investors.

However, business in the sector is becoming difficult to develop, hampered by various regulations made by the government. In 2012, the government has made a ban on the export of raw minerals. In the same year, the divestment requirement was also increased for foreign companies engaged in mining. Not only that; many foreign companies are also required to renegotiate their contracts with the government.

Infrastructure

Since the end of 2014, the government has prioritized the development and development of infrastructure in Indonesia. Various projects are announced, most of which cover the expansion or development of port areas, airports, terminals, and other transport-related infrastructure. For foreign investors, that is good news. The ease of access to and from various places is an important factor for business smoothness.

Unfortunately, those activities do not run as expected. The arrangements that stigmatize the institutions overshadowing those projects still overlap and do not function effectively. Capacity for partners involved to run it is still narrow, thus the insufficiency of available manpower. It does not end there. Limited funds, legal laxity, lack of clarity of concepts, and lack of anticipation also hinder the work.

Obviously, those obstacles should be of concern to the government, if they do not want to depreciate the number of foreign direct investment in Indonesia. Improvements in various sectors need to be done. Regulations on openness and restrictions on foreign direct investment need to be scrutinized again in accordance with industrial needs. 

In addition, cases such as corruption also cannot be ignored. Although detailed instructions on corruption eradication have been issued by the government, the efforts to encourage companies to tighten their internal codes of ethics still remain unclear. If those obstacles are overcome, the potential for improved economic stability can be achieved from the foreign direct investment.