Investment Relocation from China to Indonesia

The COVID-19 pandemic has not become a hindrance for companies to continue their investment. These companies grow to be more motivated in relocating their investment. Since last year, there has been an increase in companies that decided to move their factories from China to the Southeast Asia countries.

The main factor of this relocation phenomenon is the expensive customs fee set by the United States due to their trade war with China. This trade war has positive impact on investment in Indonesia, not only did they move from China, but some countries also have decided to permanently close their production center in other countries, including Malaysia and Japan.

Destinations for investment relocation

The investment relocation to Indonesia becomes a more attractive option for foreign companies ever since China was declared as the center of COVID-19. The Indonesian government has prepared themselves to avoid repeating the same mistake as in the previous years, where 33 foreign companies that left China decided to relocate their investment to neighboring countries like Vietnam.

The success of investment relocation to Indonesia will create a positive impact to the nation’s economic state. Not only due to the large increase in investment realization, but also due to the rise of job vacancy. Indonesia, with its great market share and immense growth potential, is also a very strategic location for investors, especially its proximity with Asia and Australia markets.

Three main duties of the relocation task force

Indonesia is among the best 10 countries for investment in 2020, intact with an abundance of natural resources and large market potential. To attract more foreign investors and facilitate their investment relocation to Indonesia, President Joko Widodo has commanded the BKPM to facilitate the investors from the very beginning until the realization step.

The BKPM Chairman has formed a special task force to handle every possible dealings for investment relocation to Indonesia. This task force directly works under commands from the Chairman. This relocation task force is given three main duties to intensively attract more investment relocation to Indonesia.

These three duties consist of detecting companies that plan to relocate, checking the current facilities directed for the investors, and making decisions when negotiating. This task force will aid the investors in registering their business licensing, starting from the ministry level to regional government.

Looking at Vietnam as a neighboring country that is also the main competitor for Indonesia in cementing this investment relocation plan, Indonesia has considered arranging a more straightforward investment regulation, set cheaper export costs, and revamp the infrastructure as well as the land for factories construction.

Relocated companies

Until now, there are 7 foreign countries that have decided to relocate their investment to Indonesia. Some of which are the United States that becomes the eighth largest total investment in Indonesia during the first quarter of 2020, Japan that ranks fourth with USD 608.7 million of total investment, Taiwan, and South Korea. The accumulated total investment from this investment relocation has reached Rp11,9 trillion.

The seven foreign companies that have been confirmed to relocate to Indonesia are Alpan Lighting, an American company that engages in solar-powered lights; Sagami Electric, an electronic company from Japan; Denso, a motor parts company from Japan; Panasonic, an electronic company from Japan; Meiloon, a Taiwanese company that engages in electronic products manufacturing; Kenda Tire, tire manufacturer from Taiwan; and LG Electronics, an electronic company from South Korea.

Apart from these seven companies that have started their investment relocation to Indonesia, BKPM notes that there are 17 more investors who are interested in relocating their factories to the industrial area in Indonesia. BKPM also states that it will continue helping the investment realization of PT Hyundai Motor Manufacturing Indonesia (HMMI) that is currently ongoing amidst the pandemic. From licensing, raw materials supply, to factory area, all have been directly handled by BKPM.

Lee Young Tack as the President of Hyundai Asia Pacific has delivered their thanks directly to the Indonesian government and BKPM for the help. With the support of the government and BKPM, HMMI can still operate amidst the COVID-19 pandemic. Lee wishes that the regional government continues its support to further promote the investment from Hyundai.

The success of BKPM and government in aiding HMMI investment amidst the pandemic is a concrete proof of Indonesia’s ability in supporting the business development of foreign investors.