The first piece of good news for Indonesia in 2018 came pretty early – in fact, even before the year had started. In November last year, the World Bank announced its Ease of Doing Business (EODB) index for 2018, in which Indonesia climbed 19 places to 72 from its previous rank of 91. It was not exactly a huge surprise, given that the country had been steadily climbing in the rankings since 2014 – when Joko “Jokowi” Widodo, the current president, took office and Indonesia was in the 140th spot.
Much of this success has been attributed to Indonesia’s deregulation of its economy. According to the World Bank’s report, the Southeast Asian nation scored 83.87 percent in “distance to frontier” metric, which helps assess the absolute level of regulatory performance over time. Indonesia’s score represented the best performance observed since 2005 on each of the indicators across all economies in the EODB sample.
But that’s not the only reason 2017 has been a good year for Indonesia. The Jakarta Composite Index (JCI) repeatedly broke its own record last year, increasing by 19.99 percent to 6,355.66. And in May, rating agency Standard & Poor’s (S&P) upgraded Indonesia’s sovereign ratings to investment grade. Fund managers told Reuters that the investment grade from S&P, which matches the ratings awarded by Fitch and Moody’s years ago, will give Indonesia access to a wider pool of investors.
All this has raised hopes of a massive wave of investment into Southeast Asia’s biggest economy. In early January, Thomas Lembong, chief of Indonesia Investment Coordinating Board (BKPM), says that 2018 direct investment growth is targeted to grow at around 10-14 percent. The e-commerce and services sectors are set to be two of the biggest drivers, expanding by up to 80 percent and 40 percent per year, respectively. For 2017, Indonesia had set a target of about 11 percent expansion.
The mood among foreign investors is definitely improving, lawyers say. “Foreign investors see that Indonesia has been moving in the right direction in terms of economic and legal reforms,” notes Genio Atyanto, managing partner of Indonesian law firm Nasoetion & Atyanto (N&A). “They see that in the last two years, the country has been showing lower credit and currency volatility risks. Such lowered risks, combined with positive regulatory changes, have been attracting foreign investment.”
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