Source: Kompas, October 7 2019

Writer: Akhdi Martin Pratama, Editor: Bambang Priyo Jatmiko

JAKARTA, KOMPAS.com – Indonesia is said to be the only country in ASEAN to have lost its chance in taking advantage of the trade war’s effects between the United States and China.  

Many Chinese companies chose other countries instead of Indonesia in regard to business relocations. 

Lee Ju Ye, a Singaporean economist, said that Vietnam emerged as the “biggest beneficiary” with a surge in 73 percent of foreign direct investment inflows from China and Hong Kong last year.

In the first half of 2019, FDI applications in Vietnam jumped 211 percent.

It was not only Vietnam but also Malaysia that also recorded an increase in Chinese FDI earlier this year after a decline in the past two years. 

Meanwhile, Singapore has also benefited, because companies moving to Malaysia will likely take loans from the country’s banks.

“Even the Philippines, a country not commonly known for its manufacturing sites, also received an abundance of foreign direct investment,” said Lee, as quoted from South China Morning Post, Sunday (6/10/2019).

“The only loser seems to be Indonesia,” he added. 

Even so, said Lee, Indonesian President Joko Widodo has noticed. Jokowi, who was re-elected as president, demanded that his cabinet ministers work harder to take advantage of the conditions of the trade war.

Citing data from the World Bank which said out of 33 Chinese companies that moved operations abroad, 23 chose Vietnam, 10 went to Malaysia, while the rest went to Thailand and Cambodia.

Lee said Pegatron, a Taiwan electronics company, had decided to build a factory in Batam, Indonesia, but other multinational companies were cautious because of several factors, such as labor laws which require employers to pay high severance payments even if staff are fired.

“Indonesia has lost its chance, and I think this is a warning for the government to do more,” he added.

The Indonesian government recently announced plans to reduce corporate taxes by 20 percent from the previous 25 percent tariff.

Other Countries 

Not only Indonesia, other Asean governments are actively seeking Chinese companies to move to their territories.

Thailand, for example, launching a relocation packed called Thailand Plus. Some of the incentives offered under the package include five years, a 50 percent reduction in corporate income tax as well as grants to increase labor.

In Malaysia, the government has formed a committee to speed up applications related to investments coming from China.

“Usually it takes three months for applications to be approved. Now, it can be approved in just one week, “said Lee, who spoke at a seminar organized by ISEAS-Yusof Ishak Institute in Singapore.

He and his economist colleague Linda Liu also spoke about the Belt and Road Initiative, China’s ambitious infrastructure plan to increase global trade and connectivity.

They noted that although the China Global Investment Tracker, which monitors China’s global construction and investment activities, recorded a decrease in total investment and construction contracts in 2018, there was a surge earlier this year.

“In 2018, investment and construction contracts have dropped quite strongly from US $ 38 billion to US $ 22 billion … changes in government in Malaysia have led to several government projects being put on hold,” Lee said.

The region received a $USD 11 billion Chinese contract in the first half of 2019, with $USD 3 billion to be sent to Indonesia and $USD 2.5 billion to Cambodia.”The administration (the Indonesian government) is more receptive to Chinese funds, and more open to working with China,” Lee said.

Originally in Indonesian.