We have seen a sharp increase in the number of delegations visiting the country, indicative of the availability of many business opportunities in Indonesia.
Mr Jakob Friis Sorensen, Chairman
EuroCham’s mission is to be the voice of European business in Indonesia and facilitate trade and investment between the two regions. What can you tell us about your organisation’s background and its priorities going forward?
The European Chamber of Commerce in Indonesia currently has 175 private company members that drive our organisation forward. We have sixteen working groups dedicated to different sectors and they carry out extensive research to release publications that express the opinions of our members. These precision papers are used as the foundation to pursue our advocacy towards stakeholders and groups that shape the Indonesian business climate such as KADIN, APINDO, the House of Representatives (DPR) and the government. Our approach can be likened to a grass roots initiative, in the sense that we are bottom up focused and do not take instructions from Brussels. It is our priority to make the business environment here in Indonesia as conducive as possible to the success of European and local companies.
The EU and Indonesia initiated talks to implement a Comprehensive Economic Partnership Agreement (CEPA) at the beginning of 2012. What steps need to be taken to finalise the agreement and will this finalisation take place before the upcoming presidential election?
I was part of the Vision Group put together by President Yudhoyono and Mr Barroso, President of the European Commission and we delivered a report which clearly recommended that the EU and Indonesia should put in place a Comprehensive Economic Partnership Agreement. The group consisted of both European and Indonesian business players, as well as academics from both sides, and our findings made it evident that there were only upsides to pursuing this kind of deal. Though it took quite some time to get the scoping done, there is now a draft on the table put forward by the European Union to which Indonesia has yet to respond. As such, the next step is for Indonesia to get back to the EU with comments on the scoping so that further negotiations can begin. There is a very good opportunity to get this done following our EU Indonesia Business Dialogue (EIDB) event, as we managed to get discussions started again. With that said, attention amongst many of the relevant parties is presently focused on the WTO agreement.
In comparison to the Partnership and Cooperation Agreement implemented in 2009, what will be the direct impact of the CEPA on the relationship between Europe and Indonesia?
The tariff regime is already relatively mild, so there is not a great deal more that needs to be done in this area. It is the nontariff barriers currently faced by both parties that we hope to address. European companies must still contend with the negative investment list and uncertainty over public procurement. From the Indonesian perspective, companies here deal with issues related to getting their products into the EU caused by bureaucracy in Brussels. Compared to existing agreements, the CEPA is much more about encouraging investment, opening up new growth streams for Indonesian and European companies, creating jobs and pushing infrastructural development.
The revised negative investment list opens up several areas previously closed to overseas investment, including port management. What other industries do you think should be made available to foreign companies in the future?
Ideally, we would not have something called the negative investment list. We have suggested that the government should create a positive list detailing priority investment areas where Indonesia wants to attract the world’s best players. This would provide more focus to the master plan put forward in the MP3EI and will prove to be a powerful tool in attracting European companies. At the moment, I feel that Indonesia wants everything to be made in the country, views imports negatively and wants to have exports exclusively.
This is not how the world economy works; imports are not necessarily bad insofar as the country is able to identify areas it can excel, uses its raw materials to carry out value added processing and exports the resulting products. In this context, it would be beneficial to all parties for the government to establish a clearer strategy on where it most needs investment and wants to accelerate development.
What are the main mistakes or oversights that European companies make when coming to Indonesia?
Indonesia is a place where you need to have a long term perspective. If anyone has made mistakes in coming to Indonesia, it is likely that they believed that it was possible to enter the market, make some quick money and then leave. Others have maybe established their operations in Singapore and Malaysia and thought that they could handle the Indonesian market from overseas, which is also a mistake. Foreign companies here must be committed, on the ground, and willing to carry out market research and the footwork needed to be successful. It is also crucial to take the time to obtain proper licensing and seek assistance from BKPM, who provide comprehensive services to help European businesses set up. Should it be the case that further assistance is required, I recommend companies struggling with lengthy bureaucratic processes to get in touch with us.
EuroCham has been a vocal proponent of initiatives to improve intellectual property rights and develop standardised certification processes between Indonesia and Europe. What are your immediate priorities to continue to improve the business climate in Indonesia?
Going forward, we plan to focus our efforts on easing regulations put in place by the negative investment list and attracting more SMEs to come to this country. We also recently launched a project to develop an EU business network. Finally, with the elections taking place next year we have made it a priority to publish a white paper to ensure that the economy continues to be attractive so we do not lose momentum over the next twelve months. This report would also give us an action plan to present to the new government, with details on readily available opportunities to be taken advantage of in guaranteeing further economic stability and progress by the end of next year.
Given the context of a recent weakening of the rupiah as well as the upcoming presidential election, what is your outlook for the prospects of investing in Indonesia over the next nine months?
There is no doubt that we have some interesting months ahead of us, but I expect that whoever wins the election will want to continue the economic reforms already gaining momentum. Based on this, I believe that the new government’s desire to kick start the economy after the election will necessitate opening up to foreign investors further by the end of 2014. It is important that companies spend the time prior to this preparing; newcomers in particular should take the time to carry out research, find a good local partner and establish a distribution network so that they are in position to benefit from the new market when conditions become more favourable.
In the long run, I am still quite optimistic about Indonesia; not enough attention is paid to the strides this country has made in implementing a democratic model over a remarkably short period of time that allows its citizens to feel in charge of their own destiny.
What would you like our readers to remember as a final message?
We have seen a sharp increase in the number of delegations visiting the country, indicative of the availability of many business opportunities in Indonesia. Readers should remember that our website, as well as Global Business Guide Indonesia’s online platform, provides in depth information on how to do business here and can serve as a valuable resource in making the decision to invest in Indonesia.
Global Business Guide Indonesia - 2014