Jakarta. - Indonesia has become an increasingly vital investment hub for Japanese companies in Southeast Asia, according to a statement published jointly by Kroll, one of the biggest corporate investigations firm in the world and Mergermarket, a global merger and acquisition intelligence service.

The statement said in terms of merger and acquisitions (M&A), “Indonesia remains a favorable market in the Southeast Asia region and last year achieved a new record for deal value, reaching a high of just over $2 billion.”

Such value represents about 17 percent of the total mergers and acquisition deal value among member countries of the Association of Southeast Asian Nations (Asean). Thailand remained the top pick, dominating about 44 percent of the total M&A deal value in the region.

The statement said Indonesia’s financial services industry offers “huge potential even though the sector still has relatively low penetration, particularly among insurance providers.”
“For many investors it is becoming an increasingly enticing proposition. Data from Fitch Ratings highlights that the foreign ownership cap of 80 percent is far more competitive than India [26 percent] and Thailand [49 percent],” Kroll and Mergermarket said.

Growing private consumption now makes up around 55 percent of Indonesia’s gross domestic product, adding further attractiveness to the country.
“An extra 90 million people are expected to move into the middle-income bracket by 2030 further fuelling consumption rates. If current trends continue it is believed that Indonesia will account for 40 percent of growth in the region,” the statement said.

Analysts have said that the country has drawn investor interest, thanks to its young population, rising per-capita income and stable economic growth — in addition to abundant natural resources.
However, Kroll also reminded its clients that investors still need to watch out for factors that negatively impact the business environment.

Kroll’s Asia head, senior managing director Tadashi Kageyama said this year Indonesia went through a turbulent period with the legislative changes that were implemented prior to the presidential election.

Kageyama noted two legacies from Susilo Bambang Yudhoyono’s administration that investors need to watched out for.

Firstly, the passing of new trade laws that lean towards protecting domestic industry and pave the way for lawmakers to review free-trade deals.
Second is the revision of the country’s negative investment list, which had been criticized by the foreign business community as it could deter investment.
“Investors need to be acutely aware of how to mitigate the risks related to the new Trade Law and the impact the negative trade list has on their future investment prospects,” Kageyama said.

In a Reuters report on May 14, the revision introduced limits for new foreign investment in storage, retail trade, oil services, horticulture and small power plants.
Kageyama mentioned the victory of Joko Widodo, who is seen by investors as a reformer, “signals important changes in the landscape for foreign direct investment and merger and acquisition in Indonesia.”

However, he elaborated that understanding how Joko’s pro-business approach impacts on opportunities is central to seeing positive returns on any investment in the country.

Source: The Jakarta Globe

Label: Ekonomi

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