The Dilemma with Foreign Capital in Indonesia

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How excited should investors be about Jokowi’s economic plans?

In Indonesia, until recently the only possibility to conduct business was shrouded in a cloud of miasma, too busy harming the country. Investment opportunities don’t seem to be lost now though, with the Jokowi administration vocally vouching for the wonders of foreign capital but is too early to speak of it’s wonders? Joko Widodo, Indonesia’s new and young President has outlined his desire to see a large-scale regulation overhaul that could perhaps give foreign capital more room to breathe.

The past six months has seen Indonesia roll out measures such as, foreigners granted permission to open bank accounts and import restrictions have been slashed on a wide array of products, inclusive of cosmetics – they were previously in place to protect the local industry. However, in the middle of all this optimism there are still widespread concerns about how slow the reforms have been in reigning in change.

Indonesian national currency, the rupiah is sliding next to the dollar and economic growth is slow since 2009. The massive overhauls still need to happen because so many sectors in the country are not open to foreign capital, such as exports of metal-ore.

Batavia, a port town in Indonesia used to be renowned for pepper but now it is home to old colonial mansions from the Dutch East Indies period. The town is so different from Jakarta and it’s smog and it is worth visiting if the area is better looked after as heritage sites – tourism is a priority for Widodo and it’s not hard to rake in economic progress through it because Indonesia is littered with beaches.

Indonesia is a lucrative environment for business with its strictness in laws, like the one that makes it mandatory for foreigners to the country to pass a language test and acting as a relatively moderate Islamic nation. So Jokowi would be well advised to listen in on the complaints over the delays in deregulation, on revitalization, and roll them out perhaps on a stage that impacts more – the decentralization of national government administration and handing more power to local government in the new millennium, is a good example of positive political reforms.


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