Investing in Indonesia: How to ride the Garuda and avoid the nagas

INDONESIA'S investment relationship with Singapore goes some way back: the very name Singapura, Sanskrit for Lion City, was reportedly given to the then-island of Temasek by Sang Nila Utama, a prince from Sumatra, when he decided to rename the island and develop a settlement.

A lot of money flows the other way these days: the 2018 investment by Singapore's sovereign wealth fund Temasek Holdings in Indonesian ride-hailing firm Go-Jek was just one more investment from Indonesia's largest source of foreign direct investment (FDI), a position which Singapore has maintained for five consecutive years as of 2019. Among sources of foreign investment, Singapore's US$3.4 billion in 5,348 projects in the first half of 2019 was a billion dollars more than the US$2.4 billion in 3,708 projects from Japan, the second-largest investor.

Until recently, Indonesia was a comparative laggard when it came to attracting FDI: even with a much-larger economy - and population - than Singapore, it received far less FDI. According to the World Bank, net in-bound foreign investment to Indonesia in 2018 was just over US$20 billion, less than a quarter of the US$82 billion that Singapore received. With business stability renewed by the April 2019 re-election of President Joko Widodo (also known as Jokowi), who has made the attraction of foreign investment a key plank of his economic renewal programme, that may be changing.