Jakarta on right track to draw investment: Analyst

Labourers work on a construction site for a new office building in Jakarta, Indonesia on Feb 4, 2016.
Labourers work on a construction site for a new office building in Jakarta, Indonesia on Feb 4, 2016. PHOTO: REUTERS

Indonesia is moving in the right direction in its effort to attract more foreign investment, but needs to be more consistent in its policy execution, said Ms Selena Ling, OCBC's head of treasury research and strategy.

One example she cited is a plan to build a high-speed train to link capital city Jakarta to Bandung that attracted Chinese and Japanese investors. The US$5.5 billion (S$7.7 billion) project is now in limbo following land and construction permit snags, even though it was launched by President Joko Widodo last month, media reports say.

Ms Ling said that the appetite for Indonesian investment has been helped by the recent government announcement to open up more sectors to foreigners in South-east Asia's biggest economy.

Foreigners will be allowed to own a majority stake of up to 67 per cent of businesses in Indonesia's healthcare and transport sectors. The government will also allow 100 per cent foreign ownership of restaurants, cafes and some e-commerce firms. "They are basically throwing the doors open and saying 'come and invest'," she said at a quarterly briefing as part of The Straits Times Global Outlook series yesterday.

The best performing stock market in Asia so far this year, Ms Ling said, is the Jakarta Composite Index. It was up 2.63 per cent yesterday from the start of the year, Bloomberg data showed. In contrast, the Straits Times Index was down 7.5 per cent during the same period.

Touching on last month's terrorist strike in Jakarta, Ms Ling said there was a knee-jerk sell-off of its stocks, currency and bonds. But the markets rebounded a few days later after seeing the competent reaction of the security agencies.

"Blips, event risks, terrorist attacks will come and go, but generally it doesn't affect the overall Indonesian potential," she said.

Still, Ms Ling said Indonesia needs to get its act together as investments into Asia have been tapering off. She said: "They are chasing a shrinking pie, so they have really to stand out above the crowd."

Reme Ahmad

For more on The Straits Times Global Outlook Quarterly Briefings, go to http://str.sg/globaloutlook

A version of this article appeared in the print edition of The Straits Times on February 25, 2016, with the headline 'Jakarta on right track to draw investment: Analyst'. Subscribe