Attracting more investment, including from industrial relocation amid a trade war between the United States and China, is no easy feat. Besides improving the appeal for direct investment, Indonesia needs to boost tourism as an alternative source of income amid the sluggish international trade.
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JAKARTA, KOMPAS — Attracting more investment, including from industrial relocation amid a trade war between the United States and China, is no easy feat. Besides improving the appeal for direct investment, Indonesia needs to boost tourism as an alternative source of income amid the sluggish international trade.
Indonesian Furniture and Handicraft Association (HIMKI) secretary-general Abdul Sobur, when contacted on Sunday (9/6/2019), said Indonesia had the opportunity to take advantage of the trade war to attract investment. However, Indonesia was the last option as a destination for relocation from China – after Vietnam, Malaysia and Thailand.
Besides having free-trade agreements with the US, those countries are located closer to China. Therefore, Indonesia must make itself more attractive for investment, including through aspects of taxation, interest rates, energy costs and labor regulations.
At present, Southeast Asian countries are competing hard on attracting investment to take advantage of the trade war. The Investment Coordinating Board (BKPM) has noted that, throughout the first quarter of 2019, there were 10,453 foreign investment projects worth US$7.19 billion, of which 1,527 projects worth $1.13 billion came from China.
Director of Centennial Group and chief executive of Centennial Asia Advisors Manu Bhaskaran said recently that the US-China trade war encouraged the relocation of production from China to other Southeast Asian countries. However, the preferred locations for factories being moved from China are Vietnam, Thailand and Malaysia, not Indonesia.
University of Indonesia economist Muhamad Chatib Basri said the US-China trade war had an indirect impact on Indonesia. The prices of crude palm oil (CPO) and coal dropped due to slowing growth in export destinations, with China being the most important market.
However, the trade war has also opened up opportunities, as investors have been relocating businesses from China to maintain good access to the US market. Indonesia could use this to its advantage. In that situation, a number of issues require attention, such as the ease of licensing, the consistency of rules among different institutions at the central and regional governments, and labor regulations.
According to Chatib, the government needs to pursue alternative sources of income. One of the most effective one is to strengthen tourism. "Tourism can be used in the near future because the effect is direct," he said.
Presidential special staff member for economics Ahmad Erani Yustika said the government continued to boost tourism, as development of that industry was one way to lessen the country’s dependence on commodity exports.
To add value to the tourism industry, the government has built roads, airports and seaports. According to Ahmad Erani, the tourism industry has a multiplier effect on other industries, such as crafts, hotels, creative industries, transportation and finance.
Indonesian Hotels and Restaurants Association (PHRI) chairman Hariyadi Sukamdani added that tourism businesses continued to offer appealing packages to attract tourists.