Singapore-Indonesia Bilateral Investment Treaty enters into force

THE Singapore-Indonesia Bilateral Investment Treaty (BIT) which establishes rules on the treatment of investors and investments from both countries entered into force on Tuesday, according to the Ministry of Trade and Industry.

Minister of Trade and Industry Chan Chun Sing said that this treaty will provide additional protection for Singapore's investments in Indonesia, and Indonesia's investments in Singapore, including protection from discriminatory treatment and illegal expropriation.

The BIT also provides investors recourse to international arbitration in the event of a dispute.

"I hope that the certainty provided by the BIT will promote greater investment flows between Singapore and Indonesia. This, in turn, would facilitate greater trade flows and closer business-to-business ties between our two countries," said Mr Chan.

The treaty was signed in a bid to safeguard investments and boost investors' confidence, and to strengthen the bilateral economic ties and greater investment flows between Singapore and Indonesia.

Separately, the updated Avoidance of Double Taxation Agreement (DTA), which has yet to come into effect, was signed by Singapore and Indonesia during President Halimah Yacob's visit to Indonesia in February 2020.(See Amendment note)

The updated DTA serves to lower tax burdens on investors in Singapore and Indonesia when they invest in each other's countries.

Mr Chan also said that Indonesia's Omnibus Law on Job Creation enacted in November 2020 has generated significant interest from Singapore companies, and will encourage greater potential investments.

Despite the pandemic, Singapore continued to be Indonesia's top source of foreign direct investments in 2020, with investments totalling US$9.8 billion, up by 6.5 per cent in 2019.

Indonesia also remained as Singapore's top 10 trading partners in 2020. with bilateral trade reaching S$48.8 billion.

"Together with the Omnibus Law, the BIT and DTA will strengthen the overall regulatory framework for investments between Singapore and Indonesia and continue to boost the confidence of our business communities as they venture into each other's markets," said Mr Chan.

"This will allow Singapore and Indonesia to leverage each other's strengths towards post-pandemic economic recovery," he added.

Amendment note: An earlier version of this article incorrectly stated that President Halimah Yacob visited Indonesia to sign the DTA last month. She visited Indonesia to sign the DTA in February 2020. The article above has been revised to reflect this.