SINGAPORE - A bilateral investment treaty between Singapore and Indonesia has come into force after being ratified in a virtual meeting on Tuesday (March 9).
The treaty establishes rules on the treatment of investors and investments from both countries. It will also grant investors from both countries additional protection on their investments.
It was signed by Minister for Trade and Industry Chan Chun Sing and Indonesia's Minister for Foreign Affairs Retno Marsudi, and witnessed by Prime Minister Lee Hsien Loong and Indonesian President Joko Widodo in 2018.
Mr Chan said: "The entry into force of the Singapore-Indonesia Bilateral Investment Treaty marks another important milestone in our countries' longstanding economic relationship.
"It will offer greater protection for Singapore investors venturing into the Indonesian market, and vice versa, safeguarding investments and boosting investors' confidence. We look forward to the further strengthening of our bilateral economic ties and greater investment flows between our countries."
Singapore has been Indonesia's top foreign investor since 2014. Singapore's investments in Indonesia totalled US$9.8 billion (S$13.2 billion) last year.
Indonesia was also one of Singapore's top 10 trading partners last year, with bilateral trade reaching $48.8 billion.
Ms Retno said that the ratified treaty would be an important boost to the economic recovery of the two countries amid the Covid-19 pandemic, potentially pushing up two-way investments by between 18 and 22 per cent in the next five years. It could also realise US$200 billion worth of investment each year in the region by 2030.
Saying the treaty provides a "win-win" situation for both nations, she said: "The treaty gives more certainty and confidence as it provides legal protection for Indonesian and Singaporean investors... (and) strikes a balance between the rights and obligations of investors and the host state of investment."
She added: "This (treaty) reflects Indonesia and Singapore's strong commitment towards open and fair economic cooperation, signalling reinforced hope and optimism to further explore business opportunities that benefit all of us."
Mr Chan also said on Tuesday that the treaty provides investments with additional protection from, for instance, discriminatory treatment and illegal expropriation.
"In the event of a dispute, the treaty provides investors recourse to international arbitration," he noted.
"I hope that the certainty provided by the treaty will promote greater investment flows between Singapore and Indonesia. This, in turn, would facilitate greater trade flows and closer business-to-business ties between our two countries."
The treaty complements other agreements, such as the updated Avoidance of Double Taxation Agreement which was signed last year. The updated agreement will lower the tax burdens on investors from Singapore and Indonesia.
Mr Chan added that Indonesia continues to be an attractive investment destination for Singapore companies, as reflected by the flow of investments into Kendal Industrial Park in Central Java, for instance.
"As the digital economy grows in significance, it is also important that Singapore and Indonesia continue to find ways to deepen our partnership on this front," he added, citing Nongsa Digital Park which has served as a "digital bridge" for tech companies in both Singapore and Indonesia.
He also highlighted the Batam, Bintan and Karimun (BBK) region, which remains a cornerstone of Singapore and Indonesia's strong bilateral economic ties.
"Singapore remains keen to collaborate with Indonesia to reinvigorate BBK's economy, by facilitating new investment opportunities and addressing the various logistical, administrative and regulatory issues faced by businesses together."
He noted that there is also significant interest from Singapore firms in Indonesia's Omnibus Law on Job Creation enacted last year.
"The Indonesian government's efforts at streamlining regulations and improving the quality and productivity of Indonesia's workforce through this law will encourage greater potential investments," he said.