JAKARTA: Indonesia hopes that the Bilateral Investment Treaty (BIT) with Singapore could potentially boost two-way investment by between 18 per cent to 22 per cent over the next five years, said Foreign Minister Retno Marsudi on Tuesday (Mar 9).
The treaty, which came into force on Tuesday after both sides exchanged instruments of ratification, would also serve as an important step for Singapore and Indonesia to expedite economic recovery after COVID-19, she added.
Speaking during an online meeting with Singapore’s Minister for Trade and Industry Chan Chun Sing to mark the occasion, Mdm Marsudi said the treaty is an important milestone for bilateral ties.
“Singapore is a major trade and investment partner for Indonesia and I think it will continue to be so for many years to come,” she said.
According to the Indonesian Investment Coordinating Board, Singapore was Indonesia’s largest foreign investor last year, with total investment worth US$9.8 billion. This figure was a significant increase from the year before when Singapore’s investment in the country was US$6.5 billion.
Mdm Marsudi noted that Singapore’s investment in Indonesia had been increasing by 6.5 per cent year on year even before the treaty came into force.
“In this current difficult situation, the ratification of the BIT serves as an important economic boost to expedite economic recovery in our two countries. It could potentially enhance two-way investment ranging between 18 per cent to 22 per cent over the next five years,” she said, adding that this would translate into around US$200 billion worth of investment per year in the region by 2030.
The Indonesian minister said on Tuesday that the treaty gives more certainty and confidence as it provides more legal protection for Indonesian and Singaporean investors in both countries.
“This BIT reflects Indonesia and Singapore’s strong commitment toward open and fair economic cooperation, signaling reinforced hope and optimism to further explore business opportunities that benefit all of us,” she added.
The treaty with Singapore is the first BIT that enters into force after years of investment treaty review by the Indonesian government, the minister said.
The BIT was first signed in October 2018. The last major hurdle for the treaty to come into force was cleared on Sep 25, 2020 when Indonesian President Joko Widodo ratified the agreement.
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On his part, Mr Chan noted that Indonesia has been an attractive investment destination for Singapore companies.
“The BIT will further boost Indonesia’s attractiveness to Singaporean companies. We hope we can continue to be the largest investor for many more years to come and we hope the investment can continue to grow from strength to strength,” he said.
“The entry into force of this BIT, even amid the COVID-19 pandemic, will certainly strengthen this partnership and send an important signal to both countries and the other partners in the region of our strong commitment to continue to grow this relationship.”
Mr Chan said that Singaporean companies have been among the first to invest in the Kendal Industrial Park (KIP) in Indonesia’s Central Java province. Since the park opened in 2016, more than 60 companies have set up their operations in the special economic zone, pumping in US$1.73 billion worth of investment and creating 9,000 jobs.
Aside from KIP, Nongsa Digital Park has also served as a digital bridge for tech companies from both Singapore and Indonesia, he pointed out. Since its launch in 2018, the digital park has grown from a handful of companies and employees to more than 150 companies and startups today, he added.
He added: “The BIT provides additional protection for Indonesia’s investments in Singapore and Singapore’s investments in Indonesia. This includes protection from discriminatory treatment in illegal expropriation and in the event of a dispute, the BIT provides recourse for international arbitration.”
“I hope with the certainty provided by the BIT, it will also help us promote more investments between Singapore and Indonesia and also to facilitate the greater trade flows and business-to-business ties between our two countries.”