HKUST – Seizing Opportunities Opened Up by the Belt and Road Initiative—Indonesia
As the "One Belt, One Road" (OBOR) initiative spearheaded by China continues to gain momentum, a prominent line-up of speakers provided insights on the ways that Hong Kong businesses and investors could stand to benefit from the initiative’s commercial opportunities.
Organised by the Hong Kong University of Science and Technology (HKUST) Business School with event partner United Overseas Bank (UOB), finance experts and an Indonesian government official shared how Hong Kong and Indonesia can utilise the Belt and Road initiative to seize opportunities from well-established trade and commerce links, as well as to tap potential projects that may help accelerate the internationalisation of the Renminbi (RMB).
Tri Tharyat, consul general of the Republic of Indonesia in Hong Kong and Macau, said the Indonesian government is playing close attention to the Belt and Road initiative, as demonstrated by the large-scale programme of infrastructure projects such as toll roads, sea ports, airports and power plants.
Under the Belt and Road initiative, Tharyat said Hong Kong serves as a "super-connector" between mainland China and the Association of Southeast Asian Nations (ASEAN) region, while it also represents the fourth ranked trade and investment partner for Indonesia. He believes it could provide an even bigger platform for Indonesian companies to tap into the mainland market and for mainland companies to explore the ASEAN market.
He also noted that the Indonesian government has signed several Memorandums of Understanding (MOUs) with the Hong Kong government during President Joko Widodo’s visit to Hong Kong and China. He also pointed out that President Widodo was among 29 heads of state and government offices who attended the high-profile Belt and Road Forum in Beijing held in May 2017.
"Our president wants to explore how our country and China can work together," Tharyat said. “Indonesia has already implemented a number of deregulation reforms, designed to make investment and business opportunities more attractive to foreign companies and investors. The three-house licensing service enables investors to obtain the permits they need in one place within three hours," he added.
Given the broad nature of the initiative in terms of scope and objectives, the HKUST Business School believes it is important for Hong Kong businesses, entrepreneurs and investors to have analyses and insights available to enable them to make informed decisions about investing in OBOR-related projects. To this end, with funding from the Hong Kong Government’s Strategic Public Policy Research Scheme, the HKUST Institute for Emerging Market Studies (IEMS) has launched a three-year OBOR research project to explore trade and investment opportunities, as well as challenges for Hong Kong.
Meanwhile, with the OBOR initiative involving more than 65 countries spanning the Silk Road Economic Belt and the 21st Century Maritime Silk Road corridors, Edwin Lai, professor of economics and associate director of the Centre for Economic Development at HKUST Business School suggested increasing levels of trade and connectivity could help to drive further internationalisation of the RMB. "As companies from China invest more into places like Indonesia under the OBOR initiative, the potential to leverage the use of RMB for trade invoicing and trade settlement and financing of projects could be enhanced," he noted.
Outlining reasons why the RMB could be used as a "business enabler", Ben Chan, head of RMB Solutions at UOB said that while the Chinese currency was previously held for its interest appreciation potential, as Belt and Road trade and investment grows, the RMB is in a strong position to be used as transaction and payment currency.
“The RMB has proved to be very stable against a basket of commonly used currencies, which raises the advantage of using it as a financing currency for long-term investments," said Chan, who believes the scale of Belt and Road activities will accelerate the use of RMB as a fundraising vehicle for infrastructure projects. Chan said the correlation between RMB and the Thai, Malaysian, Indonesian and Singaporean currencies means that it is often cheaper for Asian companies to use the RMB for hedging instead of the US dollar. "This will be another step along the internationalisation journey of the RMB," said Chan who acknowledged the help he has received from HKUST Business School students in his research of RMB as a business enabler.
David Chao, head of the Foreign Direct Investment (FDI) Advisory Unit at UOB Hong Kong, said the Indonesian government streamlining foreign investment requirements has made the process of setting up a business far more straightforward. UOB is the only non-Indonesian bank in Southeast Asia that has signed an MOU with the Indonesia Investment Coordinating Board (BKPM). The collaboration enables the Bank’s clients to apply for their Indonesia Principle Licence directly through UOB’s FDI Advisory Unit. The Principle Licence is the first license a foreign company must obtain to incorporate an entity in Indonesia.
"An important role our network of offices plays is to connect our clients to suitable joint venture partners, and to help them meet the regulatory requirements," he said.