Indonesia remains the top destination in the ASEAN region for future US corporate expansion despite the many challenges for companies doing business in the country, a recent regional survey has found.
The ASEAN Business Survey Outlook 2015, carried out by the American Chamber of Commerce (AmCham) Singapore and the US Chamber of Commerce, revealed that Indonesia, Vietnam and Myanmar remained the priority markets for future US business investment.
Brunei and Laos hold the least interest for respondents in the survey.
Indonesia managed to retain the top rank as voted by 41 per cent of respondents, down, however, from the 49 per cent reported in last year’s survey.
Respondents identified insufficient infrastructure as the greatest hindrance to investment and trade, a shift from corruption, which ranked as the highest concern for businesses last year.
The survey, the data collection of which was made between May 5 and June 5, did cite corruption as a major barrier followed by uncertainty in bylaws and regulations, and a lack of new business incentives.
Other concerns related to the availability of trained personnel, the movement of goods through customs and local protectionism.
AmCham Indonesia managing director Andrew White said Indonesia should continue to play on its strengths to attract US investors; its large market, strategic location, low labour costs and upwardly mobile and young demographics.
However, White warned against the current and prevalent regulatory uncertainty. “There’s so much uncertainty, such as the lack of stakeholder consultation before big policy decisions are made, or the conflict among the ministries [in resolving overlapping regulations],” White told The Jakarta Post on Friday.
The AmCham survey shows that respondents are dissatisfied with certain Indonesian government institutions, particularly customs, immigration and taxation.
The three agencies scored a 62 per cent, 43 per cent and 40 per cent dissatisfaction rate, respectively. Last year, the survey revealed a dissatisfaction rate of 57 per cent for customs, while the rating for immigration and taxation were the same as this year.
White also cited a lack of basic infrastructure and limited access to skilled labour as the other main roadblocks that US companies had to cope with while doing business in the country.
Fortunately, he said, US businesses were optimistic that the next Indonesian government – due to be sworn in on Oct. 20 – would be able to improve on the country’s business climate.
“US companies are prepared to continue to invest in Indonesia, because there are signs that the new government will take on these three issues [of regulation, infrastructure and labour],” White explained.
A study jointly conducted by AmCham Indonesia, the US Chamber of Commerce and USAID last year revealed that US firms poured in a total of US$65 billion between 2004 and 2012, making them the biggest foreign investors in the archipelago.
Official data based on inflows of funds recorded by Bank Indonesia (BI) shows that US foreign direct investment (FDI) settled at only $7 billion during the eight-year period, placing the country as the fourth-biggest investor in Indonesia.
The US Chamber of Commerce is the world’s largest business federation representing the interests of more than 3 million businesses of all sizes, and in all sectors, and regions, as well as state and local chambers and industry associations.
Indonesian Chamber of Commerce and Industry (Kadin) chairman Suryo Bambang Sulisto acknowledged that Indonesia had to work on its infrastructure and energy sectors despite the sustained interest from investors due to the country’s large market.
Suryo listed the export of heavy machinery, oil exploration and consumer goods as the main sectors into which US investors were looking.
“Indonesia offers the greatest potential for investment, a wealth of opportunities,” he said, adding that the Americans were keen on taking part in construction-based projects again after a period of absence.
Suryo said that investments were continuously flowing in, despite a slight decrease due to the election year. He believed that US businesses would become more upbeat about the country following the conclusion of the presidential election.