China is already one of Indonesia’s top sources of foreign investment, and with Asia’s largest economy expanding its Belt and Road programme and other initiatives, the flow of capital is all set to continue. But while plenty of opportunities lie ahead for investors in Indonesia, what challenges would they need to overcome?
With a population of 268 million and a nominal GDP of more than $1 trillion, Indonesia is, without a doubt, a heavyweight in Southeast Asia.
And the country is also getting increasingly intertwined with the second-biggest economy in the world – China.
“Bilateral relationship between China and Indonesia is growing at a steady pace with lots of mutual respect and trust, especially so under the helm of President Xi Jinping and President Joko Widodo, as President Jokowi had reiterated in many international summits, expressing his desire that Indonesia wishes to seize on the momentum of the Belt & Road Initiative,” says Will Fung, senior foreign counsel at Grandall Law Firm.
Fung believes that Indonesia will focus on infrastructure development and connectivity in the next decade or two, citing examples such as the Jakarta-Bandung high-speed railway (HSR) project. And such cooperation will certainly boost the economic ties between the two countries.
“We believe that the relationship between China and Indonesia is getting even better in the past years. From our perspective as corporate lawyers, we have seen a lot of investment made from China to Indonesia, either entirely owned by Chinese investors or jointly owned by Indonesian investors,” says Robert Hasan, an associate at Ivan Almaida Baely & Firmansyah Law Firm (IABF).
Hasan notes that the chief of the Indonesia Investment Coordinating Board (BKPM) recently mentioned that "over the last five years, China has gone from being the 13the largest international investor in Indonesia to arguably Number One today."
Patrick Wang, managing partner at T&C Law Firm, observes that there are a lot of Chinese domestic companies going to Indonesia to invest in, or enter into joint ventures in, different industries like mining, m manufacturing and infrastructure.
“In terms of investment, in just over five years, China has risen from being the 12th largest source of foreign investment in Indonesia to now being the third-largest, after the United States and Japan. In the past five years, the amount of newly signed contracts and turnover of completed projects in Indonesia by Chinese players have increased by 2.16 times and 1.92 times respectively,” says Fung.
BOOM FROM THE BELT
One major factor driving this growth in investment is China’s ambitious Belt and Road Initiative (BRI) to build connective infrastructure around the region.
“Since the promotion of BRI began in 2013, China has been the largest trading partner of Indonesia for many years, and its advantage is becoming increasingly obvious. In 2016 alone, China was not just the largest import market but also the largest export market for Indonesia. In the first half of 2018, bilateral trade between China and Indonesia increased by 28 percent year-on-year reaching $37.4 billion,” says Fung.
“There are solid reasons to believe that China will soon become the largest foreign investor in Indonesia in the next 10 years, as BRI and ‘maritime power’ have given the opportunity for the two nations to align their respective strategies,” Fung adds.
According to statistics from China’s Ministry of Commerce, China's direct investment in Indonesia totaled $1.682 billion in 2017. By the end of 2017, China's stock of direct investment in Indonesia was $10.539 billion.
Observers say the number of Chinese enterprises seeking investment cooperation in Indonesia is increasing, covering an increasingly wide range of fields, and large-scale investment projects keep emerging. The main areas of Chinese investment in Indonesia include mining and metallurgy, agriculture, power, real estate, home appliances and electronics, and digital economy.
Legal professionals are seeing evidence of this through their own portfolio of clients.
“In terms of the sectors, the natural resources, the mineral, industrial. Raw materials like cement manufacturing. That is what I am getting involved in the legal aspect for our clients,” says Wang.
Indonesia’s volatile political scene prior to its elections might have put off some investors previously, but now that the elections are over, things are improving.
“Indonesia is a multi-ethnic and multi-religious country. Political stability and multi-racial relations would be one of the issues of concerns to Chinese investors,” says Fung.
“We believe that the Belt and Road initiative may bring more impact to Indonesia in the upcoming years as the presidential election process in Indonesia has been completed, which certainly gives more confidence to the foreign investors (including from China),” says Hasan.
He cities the Jakarta-Bandung high-speed railway being built by a Chinese consortium and some Indonesian partners as an example of closer cooperation via the BRI.
But Chinese investors must be careful to not rock the boat unnecessarily.
“Chinese enterprises and their seconded senior management personnel should fully respect the religious beliefs (being the largest Muslim nation in the world) and customs of local residents, do as the Romans do and carry out social activities in accordance with local etiquette standards, and not be seen as a threat to seize the economy pie with the locals,” Fung cautions.
OPPORTUNITIES AHEAD
Going forward, there will be room to expand for Chinese companies, and explore new fields of opportunities.
“China and Indonesia can promote more complementary industrial cooperation in resources, minerals, fisheries, manufacturing and agriculture. Indonesia is rich in palm oil, coal, nickel, natural gas, oil and other mineral resources, as the domestic growth within China increases, China would certainly need and will indefinitely increase its imports on such commodities from Indonesia,” says Fung.
“On the other hand, Indonesia may require capital and technology inflow to assist in the development of its very own enormous potential for growth. In this regard, China can offer real and substantial assistance and cooperation for the processing and utilization of resources and energy in Indonesia.”
Fung feels China is both able and willing to provide better technologies for Indonesia’s agriculture and fisheries sectors.
Others say China is eager to export some of its innovative tech business models to an untapped market like Indonesia.
Hasan believes the Chinese investments in Indonesia is heading to the field of information technology, especially in the field of P2P and equity crowdfunding. This is in reference to the issuance of Chairman of Financial Service Authority (OJK) Regulation No. 37/POJK.04/2018 of 2018 regarding Equity Crowdfunding based on Information Technology at the end of 2018 (i.e. 31 December 2018).
“We have seen in the past that some Chinese investors requesting legal advice mainly on: (i) construction (EPC) for power plant; (ii) the business activities of lending and borrowing money services based on information technology (commonly known as peer-to-peer lending or P2P); and (iii) application services and/or content through internet services (OTT Services),” says Hasan.
But he says that OTT services have not been regulated in Indonesia. “There is only a Circular Letter No. 3 of 2016 regarding the Provision of Application Services and/or Content through Internet (Over The Top) (the MOCI Circular), which was issued with the purpose to give understanding to the OTT services providers and telecommunication providers to prepare themselves to comply with the regulation of the OTT services which currently is being prepared by the Ministry of Communication and Informatics,” Hasan adds.
“Pursuant to the MOCI Circular, the OTT services may be provided by foreign individuals or business entities under the condition that they must establish permanent establishment in Indonesia based on the prevailing regulations in the area of tax,” says Hasan.
Once the world’s factory, China’s shift away from that role may soon fall to Indonesia.
“With China's manufacturing industry aiming to relocate and shift their production lines in the ASEAN region in large numbers, Indonesia may wish to accommodate, formulate and promulgate on more favorable policy for their foreign direct investments, this would certainly result in helping the creation of more jobs for Indonesians at large,” says Fung.
CHALLENGES AND HURDLES
But before any of this can happen, it is of vital importance for Chinese investors to have a whole picture of the foreign investment regulations and principles to access in Indonesia, of which certain areas are prohibited from foreign investment, while others have equity requirements.
“It is a good indicator that the Indonesia Government had in 2018, cancelled the market access restrictions in 54 areas where foreign investors can own 100 percent equity interest,” says Fung,
The list of industries is extensive, covering diverse areas such as the pharmaceutical industry, acupuncture facilities, art performance galleries, commercial galleries, tourism development and market research services, data communication services including fixed telecommunication network, mobile telecommunication network, telecommunication service content, Internet access, information service center or call center, offshore oil and gas drilling, geothermal drilling, geothermal power plants, vocational training, credit investigation, and so on.
When carrying out potential investments in Indonesia, Chinese investors need appreciate that Indonesia is a huge country, with 34 provinces, divided into regencies and cities, hence it is not difficult to understand the implementation of Indonesian laws and regulations may vary according to local / unique circumstances.
And the laws themselves are ever-evolving.
“The problem is that the laws and regulations regarding foreign investment in Indonesia is uncertain and always changing. There are some restrictions in certain areas and also the percentage of shares for foreign investors is limited in certain amount. Chinese investors are not allowed to have control in invested companies in some mineral investment, less than 49 percent,” says Wang.
“Also there's some procedures for the investment, it is not so clear. Our clients always spend a lot of time getting clear on what the exact procedures they need to follow up. I think there should be some transparent, clear and certain channels for foreign investment.”
For Hasan, the key challenges for Chinese investors may come from the Negative Investment List. The Negative Investment List determines whether a particular business activity is open, open with conditions or closed for foreign investment.
“Some Chinese investors may be interested in some business fields that are open with conditions, for example in the field of P2P which is only open for 85 percent maximum foreign investment,” says Hasan.
“In this case, we have seen that the Chinese investors need to find local Indonesian investors who are conducting the same business activities and having the same business objectives. We have assisted a number of Chinese investors in drafting and negotiating in joint venture agreements with the local Indonesian investors.”
The green factor should not be neglected either.
“Although a developing nation, awareness of environmental conservation is rising, as Indonesia is highly concern with issues pertaining to environmental protection, depending on industry, Chinese investors should be mindful not to exploit the nation’s rich flora and fauna reserves,” says Fung.
Global political currents are likely to affect the duo as well.
“The trade war has affected some industry in China and now they have to restructure and have a plan for the future. This is subject to other countries who might be affected by the trade war as well. I have observed that the US government have recently made some comments that there could be some action on tariffs which will adversely affect Chinese plans,” says Wang.
Despite uncertainties in the global economy, such as rising interest rates in the dollar, the trade war between the United States and China, and the economic crisis in some emerging markets, Fung remains optimistic about the present.
“Indonesia's broad stock index is likely to rise, and government bond returns are extremely positive,” he says. “2019-2020 is still the best time to invest in Indonesia, whether it is in direct or portfolio investments.”
加深联系
中国目前是印度尼西亚最大的外资来源之一。作为亚洲最大的经济体，中国正在扩大其“一带一路”倡议和其他举措的规模，资本流动将继续。虽然在印尼的投资者们面临着大量的机遇，但同时他们又需要克服哪些挑战呢？
印度尼西亚拥有人口2.68亿，名义GDP超过1万亿美元，无疑是东南亚地区的重量级国家。
同时，这个国家与世界第二大经济体——中国——越来越多地交织在一起。
“中国和印度尼西亚之间的双边关系正在稳步发展，两国之间相互信任，彼此尊重，尤其在习近平主席和佐科·维多多总统的主持下；正如佐科维总统在许多国际峰会上所重申的那样，他期望印尼能够抓住‘一带一路’倡议的发展势头，”国浩律师事务所外籍高级法律顾问方维城说。
方律师认为，印尼将在未来十年或二十年内重点发展基础设施建设和互联互通，并列举了雅加达—万隆高速铁路项目等实例。这类合作必将促进两国之间的经济联系。
“我们认为，在过去的几年里，中国与印尼的关系得到了进一步改善。作为从事公司业务的执业律师，我们看到在印度尼西亚有许多来自中国的投资，有些是中国投资者独资的，有些则是与印尼投资者合资的，”印度尼西亚Ivan Almaida Baey & Firmansyah律师事务所律师Robert Hasan说。
Hasan指出，印度尼西亚投资协调委员会主席最近提到，“以前在印尼最大的国际投资者中，中国排名第13位；但经过过去的五年，如今中国已无可争议地成为在印尼排名第一的国际投资者。”
天册律师事务所的管理合伙人王立新注意到，有很多中国国内企业前往印度尼西亚投资于采矿业、制造业和基础设施等不同的行业，无论是以投资的方式还是以合资的形式。
“就投资而言，在短短五年多的时间里，中国已从印尼第12大外资来源国上升到仅次于美国和日本的第三大外资来源国。在过去的五年里，中国企业在印尼新签合同的数量和已完成项目的营业额分别增长了2.16倍和1.92倍，”方律师说。
“一带一路”带来的繁荣
推动这一投资增长的一个主要因素是中国不断推进实施其雄心勃勃的“一带一路”倡议，并在该地区建立起互联互通的基础设施。
“自2013年开始实施‘一带一路’倡议以来，中国就成为了印尼最大的贸易伙伴，其优势也日益明显。仅在2016年，中国不仅是印尼最大的进口市场，也是印尼最大的出口市场。在2018年上半年，中国与印度尼西亚的双边贸易额同比增长了28%，达到374亿美元，”方律师说。
“有充分的理由相信，在未来10年内，中国将很快成为印尼最大的外国投资者，因为‘一带一路’和‘海洋强国’使两国有机会调整各自的战略，”方律师补充说。
据中国商务部统计，2017年中国对印尼直接投资总额为16.82亿美元。截至2017年底，中国对印尼的直接投资存量为105.39亿美元。
观察人士表示，在印尼寻求投资合作的中国企业的数量正在不断增加，涉及领域也越来越广泛，大型投资项目不断涌现。中国在印尼投资的主要领域包括采矿和冶金、农业、电力、房地产、家用电器和电子产品以及数字经济。
法律专业人士通过其客户结构也看到了这方面的证据。
“就领域而言，主要是自然资源和矿产；就行业而言，是水泥等原料制造。我为客户们处理这些领域和行业的法律方面的事务，”王律师说。
印度尼西亚总统选举结束前动荡的政治局势可能会让一些投资者放缓了投资脚步，但现在选举结束了，情况正在好转。
“印度尼西亚是一个多民族、多宗教的国家。因此，政局稳定和多种族关系可能是中国投资者所关注的问题之一，”方律师说。
“印尼总统大选已经结束，我们认为‘一带一路’倡议可能会在未来几年对印度尼西亚产生更大的影响，这无疑给包括中国投资者在内的外国投资者们带来更多的信心，”Hasan说。
他表示，雅加达—万隆高速铁路项目就是“一带一路”倡议下中国和印尼开展更密切合作的一个例子。该项目是由中国某集团企业与印尼合作伙伴共同建造的。
但中国投资者也必须谨慎，不要惹来不必要的麻烦。
“中国企业及其派驻的高级管理人员应充分尊重当地居民的宗教信仰（印尼是世界上最大的穆斯林国家）和风俗习惯，入乡随俗，按照当地的礼仪标准开展社会活动，避免被视为一种与当地人争夺经济蛋糕的威胁，”方律师提醒道。
未来的机遇
展望未来，中国企业将会有发展空间，并且有机会探索、开拓新的领域。
“中国和印尼可以在资源、矿产、渔业、制造业和农业等领域促进更多互补的产业合作。印尼拥有丰富的棕榈油、煤炭、镍、天然气、石油和其他矿产资源；随着中国国内经济增长，中国肯定需要并且将会无限期地增加从印尼进口此类商品，”方律师说。
“另一方面，印尼可能需要资本和技术流入来协助其发展自身巨大的增长潜力。在这方面，中国可以为印尼的资源和能源加工利用提供真正的、实质性的援助与合作。”
方律师认为，中国既有能力也愿意为印度尼西亚的农业和渔业部门提供更好的技术。
另一些人则认为，中国热衷于将其一些创新的科技商业模式出口到像印度尼西亚这样尚未开发的市场。
Hasan认为，中国在印尼的投资正走向信息技术领域，尤其是P2P和股权众筹领域。印尼金融服务管理局于2018年底（即2018年12月31日）颁布了基于信息技术的股权众筹管理条例（金融服务管理局第37/POJK.04/2018号条例）。
“基于我们的经验，在过去，一些中国投资者主要就以下几个方面征求法律意见：（1）发电厂建设（EPC模式）；（2）基于信息技术的贷款和借款服务的业务活动（通常称为点对点借贷或P2P）；（3）通过互联网服务（OTT服务）提供应用服务和/或内容，”Hasan说。
但他表示，OTT服务在印尼尚未受到监管。“目前仅有印尼通信和信息部（MOCI）2016年第3号通知函涉及关于通过互联网（OTT服务）提供应用服务和/或内容的规定，该通知的目的是为了让OTT服务提供商和电信服务提供商了解并准备好遵守关于OTT服务的监管条例。MOCI目前正在制定该项监管条例，”Hasan补充道。
“根据MOCI通知函，外国个人或企业实体可以提供OTT服务，条件是他们必须根据税收方面的现行法规在印度尼西亚建立常设机构，”Hasan说。
中国曾是“世界工厂”，中国脱离这个角色之后，印度尼西亚可能很快就会承担起这一角色。
“随着中国制造业把生产线大量搬迁和转移到东盟地区，印尼有望采取相应措施，制定和颁布对在印尼的外国直接投资更为有利的政策，这必将有助于中国制造业在东盟地区的发展；而对于广大的印尼人来说，将会有更多的工作机会，”方律师说。
挑战和障碍
但在上述情况发生之前，中国投资者必须全面了解印度尼西亚的外商投资法规和原则，其中某些领域禁止外商投资，而其他一些领域则有股权要求。
“印尼政府于2018年取消了54个领域的市场准入限制，外国投资者可以在这些领域拥有100%的股权。这是一个很好的迹象，”方律师说。
行业清单非常广泛，涵盖了各个不同的领域：医药行业，针灸设施，艺术表演画廊，商业画廊，旅游开发和市场研究服务，包括固定电信网络、移动电信网络、电信服务内容、互联网接入、信息服务中心或呼叫中心在内的数据通信服务，海上油气钻探，地热钻探，地热发电厂，职业培训，资信调查等等。
在印尼开展投资活动时，中国投资者需要了解印尼是一个很大的国家，划分为34个省，下设地区和城市，因此不难理解印尼法律法规的实施可能会因为当地的情况或特殊的环境而有所不同。
而且法律本身也在不断发展变化。
“问题在于，关于外商在印尼投资的法律和法规具有不确定性，并且一直在变化。在某些领域存在一些限制，而且外国投资者的持股比例受到一定的限制。在一些矿产投资中，不允许中国投资者对所投资的公司拥有控制权，持股比例必须低于49%，”王律师说。
“还有一些投资程序也不太明确。我们的客户总是要花很多时间弄清楚他们需要遵循的具体程序。我认为应该有一些透明、清晰和确定的外商投资渠道。”
在Hasan看来，中国投资者面临的主要挑战可能来自投资负面清单。投资负面清单决定了某些特定的商业活动对外国投资是开放的、有条件开放的、或者是封闭的。
Hasan说：“一些中国投资者可能对一些有条件开放的商业领域感兴趣，例如P2P领域，该领域外国投资的上限是85%。”
“在这种情况下，我们认为中国投资者需要找到印尼当地的投资者进行合作——这些投资者从事相同的业务活动，并具有相同的业务目标。我们已经协助了一些中国投资者起草文件，并与印尼当地投资者谈判签订合资协议。”
绿色因素也是不容忽视。
“印尼虽然是一个发展中国家，但其环保意识正在不断提高；印尼高度关注与环境保护有关的问题。就行业而言，中国投资者应该注意不要开发该国丰富的动植物保护区，”方律师说。
全球政治潮流也可能对两国关系产生一定的影响。
“（中美）贸易战已经影响到了中国的一些产业，现在他们必须进行重组并制定未来的发展计划；但其他可能受到贸易战影响的国家也会采取一些措施。我注意到，美国政府最近发表了一些评论，表示可能会对关税采取一些行动，这将对中国的发展计划产生不利的影响，”王律师说。
尽管全球经济存在不确定性，如美元利率上升、中美贸易战以及一些新兴市场的经济危机，但方律师对目前的情况仍持乐观态度。
他表示：“印尼的整体股票指数可能会上涨，政府债券回报率表现极为积极。无论是直接投资还是证券投资，2019-2020年仍是投资印度尼西亚的最佳时期。”
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