WhyItMatters

Indonesia opens for business

There should be a wealth of opportunities opening up for Singapore firms following Indonesia's announcement last week that it will open its doors wider to foreign investors.

The move involves lifting the ban on foreign ownership in sectors such as healthcare and cinemas, and allowing 100 per cent foreign ownership in businesses like toll roads, cold storage and restaurants.

While the details of how the new rules will be implemented have yet to be unveiled, they hold great potential for Singapore businesses, given the sheer size of the Indonesian market.

Indonesia is the world's fourth-most-populous country with about 250 million people.

The capital Jakarta alone has 9.6 million people, almost twice the size of Singapore's population.

The nation's young population, which is becoming more affluent, has strong demand for consumer goods and services.

Many Indonesians would have visited Singapore so they will be familiar with the retailers and food and beverage outlets here.

This could be a chance for businesses here to diversify from the slow-growth environment in Singapore. Although Indonesia's economy grew last year at its slowest pace since the 2009 financial crisis, it still registered expansion of 4.8 per cent.

Economists have pointed out that if Indonesia eventually develops into another source of revenue for companies here, it could help hedge Singapore's interests in other countries such as China.

But it remains to be seen if this round of sweeping reforms by Indonesia to open up its economy will include measures to safeguard investors.

A case in point is the US$5.5 billion (S$7.7 billion) Chinese-led high-speed railway, which had its construction halted just days after its ground-breaking ceremony last month.The Indonesian government said that this was due to incomplete paperwork and unresolved issues.

Freeing up more businesses for foreign investors is just the first step in attracting interest. The overall investment climate has to be conducive as well.

A version of this article appeared in the print edition of The Straits Times on February 15, 2016, with the headline 'Indonesia opens for business'. Print Edition | Subscribe