Douglas Ramage of BowerGroupAsia (BGA) Indonesia says a Prabowo administration is likely to advance the country’s “very good relations” with China and its Asean neighbours, while strengthening trade ties with the US, Australia and Japan.
“There’s going to be competition (between Indonesia and Malaysia) because FDI is limited in Asia-Pacific.
“It raises the bar for Malaysia to make itself more competitive to attract high-quality investment for areas in which it already has a toehold,” he told FMT.
Indonesia’s FDI stood at US$47.3 billion last year, successfully defending its position as South East Asia’s largest economic hub, according to Reuters.
This included US$11.8 billion which poured into its base metal industry, following a surge in investments into the nickel processing industry in the wake of the Covid-19 pandemic.
According to data from the United Nations Conference on Trade and Development (UNCTAD), Malaysia has since 2008 consistently lagged behind Indonesia in its ability to attract FDI, except in 2016.
Prabowo claimed victory in the country’s Feb 14 presidential election after unofficial vote tallies showed him well ahead of his rivals having garnered approximately 58% of votes, Reuters reported. The official results are due on March 20.
Growing confidence in Indonesia’s economy
Ramage said he has observed a shift in mindset among both domestic and foreign businesses in Indonesia, which continued to operate even in the months leading up to the general election.
“The election cycle this time was completely different. There was no pause in mergers, acquisitions, major investments and commercial decisions.
“The assumption was that Indonesia would continue being open to FDIs, and the country would remain very stable,” he said.
Ramage attributes that stability to outgoing two-term president Joko Widodo, who reformed the country’s investment climate 10 years ago, ushering in unprecedented levels of FDI.
However, he said it would be inaccurate to assume that Prabowo’s government will merely pick up where Jokowi’s administration left off.
Instead, Ramage said Prabowo may seek to expand Indonesia’s budget, while maintaining the country’s fiscal discipline built following the 1998 Asian financial crisis.
“Prabowo is proposing vastly increased spending on social welfare, which is not necessarily a bad thing at all.
“The real question in the market right now is: how will Indonesia get the funds to pay for these new programmes?” Ramage said.
Prabowo had previously said he wants Indonesia’s economy to grow by 8% annually over the next five years, and has set a tax revenue target of between 14% and 16% of the country’s gross domestic product (GDP), Bloomberg reported.