Singapore investors welcome Indonesia's new Omnibus Law

Indonesia came in 73rd position on an international ranking for ease of doing businesses by the World Bank in 2019.
Indonesia came in 73rd position on an international ranking for ease of doing businesses by the World Bank in 2019.PHOTO: REUTERS

JAKARTA - Singapore businesses hope Indonesia's new "Omnibus Law" will bring essential reforms in a wide range of areas from business permits to labour, enabling businesses to operate more efficiently in South-east Asia's largest economy.

The law aims to simplify processes to get business licences, and also introduces flexibility in the country's labour market by easing recruitment and outsourcing.

"The Positive Investment List, a regulation issued as part of the Omnibus Law, opens up sectors such as energy, telecommunication, transportation and construction services to 100 per cent FDI," a spokesman for Enterprise Singapore (ESG) told The Straits Times by e-mail.

The spokesman noted that the recently established Indonesia Investment Authority (INA) could also help catalyse investments into infrastructure projects.

The head of the Singapore permanent committee at the Indonesian Chamber of Commerce and Industry (Kadin), Dr Michael Goutama, described the law as a "positive development" and "breakthrough" in Indonesia's investment regime.

"The efficiency in bureaucracy and licensing is the area to be improved. Singapore investors want to be fast, to be efficient," he told ST.

He said the new law would also be beneficial to Singapore investors because it would transform Indonesia's labour regime - particularly pertaining to hiring and firing practices - which has been "restrictive" to being "fair."

Indonesia came in 73rd position on an international ranking for ease of doing businesses by the World Bank in 2019, lagging behind its neighbours such as Singapore, Malaysia and Thailand. The global lender highlighted Indonesia's rigid employment rules and minimum wages.

Mr Kurt Wee, president of Singapore's Association of Small and Medium Enterprises (ASME), whose members operate business in Indonesia, noted that under the new law, Indonesia's labour regime would move toward "a more market-oriented landscape", enhancing competitiveness in the jobs market in the medium to long term.

Singapore has traditionally been the largest foreign investor in Indonesia. Last year, realised investment by Singapore-based companies in 15,088 projects hit US$9.78 billion (S$13.11 billion), accounting for 34.1 per cent of Indonesia's overall US$28.67 billion foreign investment, figures from the Investment Coordinating Board (BKPM) show.

That is compared with US$6.51 billion spent in 7,020 projects in 2019.

Mr Lam Yi Young, CEO of Singapore Business Federation (SBF), also welcomed the new law. He said: "Singapore businesses welcome the Omnibus Law which eases foreign investments into several sectors of interest such as e-commerce, healthcare, construction, warehousing and distribution. Singapore businesses are also keen to partner Indonesian businesses on new opportunities in these sectors."

SBF, which set up a new office in Jakarta on Jan 1, found in a survey last year that 31 per cent of 436 companies keen to venture overseas picked Indonesia as the destination for future business expansion.

The Omnibus Law will enable foreign investors to invest in the expansion of digital warehouses and start-ups and allow for equity partnerships between overseas and local small and medium enterprises in certain business sectors and under a cap on ownership, said Indonesia's Industry Ministry secretary general Dody Widodo.

The law will also resolve some issues faced by businesses in Batam. Problems with importing raw material, currently faced by several European companies in the Batam Free Trade Zone (FTZ), will be overcome, as the authority to issue import permits, sometimes involving different government agencies, will be handed over to the Batam FTZ Authority, BP Batam, said Mr Tjaw Hioeng, deputy chairman of the Riau Islands chapter of the Indonesian Industrial Estate Association (HKI).

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