What Keeps People In Indonesia?

[rabbit_39]

So what are some things that have changed in your opinion? I know a businessman and he says Americans and Europeans are quite hesitant to invest here as they want more certainty but people from China are willing to invest regardless. Any thoughts on this?

Surprisingly (to me anyway) a lot of these guys pay better attention to local news than I do. They cite things like the JIS case, various court cases, recent constitutional court decision in regards to the electricity law, etc as some of the things that made them unsure about Indonesia's legal system. They aren't sure that their contracts will be binding, though I've mentioned that many contracts mention the jurisdiction it will be applied in. Also mentioned are the increase in terrorism and religious zealot activities as additional reasons they're hesitant. Rules and regulations at the ministry level that keeps changing or not implemented are also additional reasons.

While most of these things have been around since before 2010 (when I arrive again in Indonesia), it has become more common in the last 2-3 years. Some examples in the mining industry (because it's happening right now):
http://www.reuters.com/article/us-indonesia-mining-idUSKBN14X12A
"A major Chinese investor in Indonesia's smelter industry said on Friday it was considering legal action and would put on hold its expansion plans in the country, after the government abruptly reversed a ban on the export of nickel ore and bauxite."

http://jakartaglobe.id/business/fre...act-extend-indonesian-operations-beyond-2021/
"Freeport Indonesia, the local unit of United States mining giant Freeport McMoRan, has asked the Indonesian government to swap its current contract-of-work with a special mining permit as the miner races against time to secure an extension for exporting gold concentrates from Grasberg in Papua, Indonesia's largest gold mine."

http://www.antaranews.com/en/news/1...reatens-to-revoke-permits-of-mining-companies
" Government Regulation (PP) No. 1 of 2017 necessitates mining companies to change their contract of work (CoW) status to a special mining business license (IUPK). This applies to mining firms willing to export concentrates."The change of status to IUPK will not, however, guarantee that a mining firm can have its permit extended if its smelter development had not made progress. The IUPK and permit are two different things. They both have to be applied," Jonan noted."

 

[rabbit_39]

Yes you could be right. I know rabbit_39 wrote it is much more difficult to convince people then in 2011 to 2013. I was wondering if he, or someone knows what might have changed? It is not like there was a lot of certainty 2011-2013 was there?

It's just that there are a lot more uncertainties in the recent years. Or at least a lot more uncertainties being reported (legal, regulatory and policy, social unrest, etc).

 

[rabbit_39]

Most likely Americans and Europeans see the lack of regulation as threat while the Chinese see it as an opportunity.

That's absolutely right. Many of the "new" companies looking at Indonesia are split into these two categories. Those who want to do things based on existing regulations and therefore pushing for policy changes (or in many cases new policies) and those willing to invest without clear policy as long as the current framework allows the business model. I wouldn't say it's absolutely split into "Americans and Europeans" vs the Chinese. But you can make that generalization and it would likely hold true 51% of the time. (disclaimer: based on personal experiences)

 

[Daniel50]

Surprisingly (to me anyway) a lot of these guys pay better attention to local news than I do. They cite things like the JIS case, various court cases, recent constitutional court decision in regards to the electricity law, etc as some of the things that made them unsure about Indonesia's legal system. They aren't sure that their contracts will be binding, though I've mentioned that many contracts mention the jurisdiction it will be applied in. Also mentioned are the increase in terrorism and religious zealot activities as additional reasons they're hesitant. Rules and regulations at the ministry level that keeps changing or not implemented are also additional reasons.

While most of these things have been around since before 2010 (when I arrive again in Indonesia), it has become more common in the last 2-3 years. Some examples in the mining industry (because it's happening right now):
http://www.reuters.com/article/us-indonesia-mining-idUSKBN14X12A
"A major Chinese investor in Indonesia's smelter industry said on Friday it was considering legal action and would put on hold its expansion plans in the country, after the government abruptly reversed a ban on the export of nickel ore and bauxite."

http://jakartaglobe.id/business/fre...act-extend-indonesian-operations-beyond-2021/
"Freeport Indonesia, the local unit of United States mining giant Freeport McMoRan, has asked the Indonesian government to swap its current contract-of-work with a special mining permit as the miner races against time to secure an extension for exporting gold concentrates from Grasberg in Papua, Indonesia's largest gold mine."

http://www.antaranews.com/en/news/1...reatens-to-revoke-permits-of-mining-companies
" Government Regulation (PP) No. 1 of 2017 necessitates mining companies to change their contract of work (CoW) status to a special mining business license (IUPK). This applies to mining firms willing to export concentrates."The change of status to IUPK will not, however, guarantee that a mining firm can have its permit extended if its smelter development had not made progress. The IUPK and permit are two different things. They both have to be applied," Jonan noted."

Thanks for taking the time to write this. In speaking with an Indonesian they believe the Freeport deal is better for Indonesia. Sri Mulyani was involved in renegotiating. They report that the Freeport pie was going to a few Indonesians and the US but now it will benefit Indonesia, more jobs here. Or at least this is the hope/goal. But uncertainty and changing regulations, what you were discussing, are effected and one could argue this will decrease investment and jobs.Yes I am sure the businessman I was talking to did not get into final data but was talking in general terms, or some of his personal experience. It was interesting how the news of JIS and growing religious extremism also effects their decisions. I hear in the news how this or that may effect investment but I tend to think it is more blowing smoke. Again thanks.

 

[Daniel50]

Is this blowing smoke? As far as trying to alleviate fears of investment in Indonesia? Will this help people want to stay or come to Indonesia?

http://jakartaglobe.id/business/ind...destinations-attracting-investors-ecn-survey/

 

[rabbit_39]

Is this blowing smoke? As far as trying to alleviate fears of investment in Indonesia? Will this help people want to stay or come to Indonesia?

http://jakartaglobe.id/business/ind...destinations-attracting-investors-ecn-survey/

It is realistic. Some people will find that the risks of doing business in Indonesia is in line with their risk appetite. There are enough people doing investment in Indonesia. It could be a lot more.

From the article:
"These countries were ranked by around 50-60 percent of those surveyed as having responded to risks in ways that will result in some kind of improvements for business."

On Indonesia, the survey says about 53.7 percent of the respondents said they will increase their investment in Indonesia, Southeast Asia's largest economy."

"Despite receiving positive notes from respondents, the ECN's report says it "remains skeptical" about the ability of President Joko Widodo "to enact significant business reforms.""

 

[Davita]

The Globe reports on an article written by the Economist Corporate Network (ECN) that 223 Asian business executives were surveyed to produce the article...yet not one of those businesses were mentioned by name.
I searched for the actual report to read for myself but couldn't find...anyone seen the actual ECN report?