Indonesia wants firms relocating from China. Why are so few coming?
- Jakarta has opened its doors to manufacturers looking for a new home amid the US-China trade war and Covid-19’s impact on global supply chains
- While seven companies this week announced a move there, analysts say red tape, systemic corruption and a lack of infrastructure are obstacles Indonesia must overcome
Earlier this week, President Joko Widodo announced that seven companies, including South Korea’s LG and Japan’s Panasonic, had confirmed their relocation to Indonesia. Just one firm from the United States, light product maker Alpan, said it was moving there from China, according to The Jakarta Post.
Indonesia is actively looking to court investment as it braces for a widely forecast contraction in its gross domestic product. Southeast Asia’s largest economy, which is home to 270 million people, has seen its steady GDP growth upended by trade and supply chain disruptions due to the Covid-19 pandemic.
To this end, a task force set up by Indonesia’s Investment Coordinating Board (BKPM) to attract external investment is reportedly in talks with American, Japanese and South Korean firms over their relocation to industrial zones being developed in Central Java.
The Jakarta Post quoted Widodo as saying 17 more companies were looking to open facilities in Indonesia, with data from BKPM showing these firms will bring in total investment of US$37 billion and employ 112,000 people.