Swot Analysis of Indonesia as a Destination for FDI:
Strengths:
• Geographically speaking, Indonesia lies in the strategic location through which the world trade transits, i.e. near straits of Malacca that link Indonesian ocean littoral to the South China Sea and the larger Pacific Ocean. If developed, can become a major transit hub in the world.
• Country is rich in natural resources like coal, minerals like tin, gold, copper, nickel and bauxite, oil & gas and fertile land to support agricultural products.
• Archipelago’s tropical climate and huge land bank makes it ideal for producing palm oil, rubber, coffee, cocoa, and rice.
• Majority of the population i.e. 50% lies below 29 years of age, while 67% is below 39 years of age, which will …show more content…
Hence foreign companies with their infra expertise can pitch in for investment.
Weakness:
• Though adequate legal system is present, but too, professional advice should always be obtained with regard to contracts and agreements made in Indonesia. One reason is that the civil law provides for certain clauses to apply to all agreements unless specifically excluded. Litigation can be unpredictable in terms of outcomes, protracted and time consuming, and as a result is not commonly an effective route to resolve disputes. o Contracts commonly include Indonesian or international arbitration for resolution of disputes. A popular choice is Singapore in accordance with the rules and regulations of the Singapore international Arbitration centre where the final, binding arbitral award is automatically ratified in the Indonesian courts.
• But usually, a significant period of time can elapse between new laws being announced, drafted, and passed by parliament and final regulations or decrees being rolled …show more content…
Excessive bureaucracy and a lack of coordination at the ministerial level has undermined the country’s business environment.
• The World Economic Forum ranks Indonesia’s infrastructure as 72nd out of 144 countries, and 4th in the ASEAN region, below Singapore, Malaysia and Thailand. Infrastructure spending in Indonesia (both public and private) remained subdued following the 1997 Asian economic crisis. As a result, Indonesia has poor basic infrastructure and remained under-invested, holding back not only Indonesia’s growth potential but also progress in poverty reduction.
• Coming to the ports which become the important doors through which majority of the nation’s takes place, Indonesian ports are among the least efficient in south east asia in terms of lead times, which are 3 days compared to those of most ASEAN countries, which are only 1day. Even the logistics costs are higher, i.e. around USD 579.
• The lack of clear regulations for public use and the provision of land compensation to owners have caused delays to toll road and other infrastructure projects.
Strengths:
• Geographically speaking, Indonesia lies in the strategic location through which the world trade transits, i.e. near straits of Malacca that link Indonesian ocean littoral to the South China Sea and the larger Pacific Ocean. If developed, can become a major transit hub in the world.
• Country is rich in natural resources like coal, minerals like tin, gold, copper, nickel and bauxite, oil & gas and fertile land to support agricultural products.
• Archipelago’s tropical climate and huge land bank makes it ideal for producing palm oil, rubber, coffee, cocoa, and rice.
• Majority of the population i.e. 50% lies below 29 years of age, while 67% is below 39 years of age, which will …show more content…
Hence foreign companies with their infra expertise can pitch in for investment.
Weakness:
• Though adequate legal system is present, but too, professional advice should always be obtained with regard to contracts and agreements made in Indonesia. One reason is that the civil law provides for certain clauses to apply to all agreements unless specifically excluded. Litigation can be unpredictable in terms of outcomes, protracted and time consuming, and as a result is not commonly an effective route to resolve disputes. o Contracts commonly include Indonesian or international arbitration for resolution of disputes. A popular choice is Singapore in accordance with the rules and regulations of the Singapore international Arbitration centre where the final, binding arbitral award is automatically ratified in the Indonesian courts.
• But usually, a significant period of time can elapse between new laws being announced, drafted, and passed by parliament and final regulations or decrees being rolled …show more content…
Excessive bureaucracy and a lack of coordination at the ministerial level has undermined the country’s business environment.
• The World Economic Forum ranks Indonesia’s infrastructure as 72nd out of 144 countries, and 4th in the ASEAN region, below Singapore, Malaysia and Thailand. Infrastructure spending in Indonesia (both public and private) remained subdued following the 1997 Asian economic crisis. As a result, Indonesia has poor basic infrastructure and remained under-invested, holding back not only Indonesia’s growth potential but also progress in poverty reduction.
• Coming to the ports which become the important doors through which majority of the nation’s takes place, Indonesian ports are among the least efficient in south east asia in terms of lead times, which are 3 days compared to those of most ASEAN countries, which are only 1day. Even the logistics costs are higher, i.e. around USD 579.
• The lack of clear regulations for public use and the provision of land compensation to owners have caused delays to toll road and other infrastructure projects.