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As the rupiah reached a five-year low on Dec. 23, 2013, the Indonesian government began to worry about the nation’s economy. It soon announced increased levels of foreign investment in the country's power plants, advertising, and pharmaceutical industries in order to boost the slowing economy. However, some people are concerned that this move will bring many challenges to the nation .
There is no doubt that these new policies will fuel the economy’s growth in the long run as more foreign investments will bring jobs and high quality products to the nation. Some people, however, are afraid that these changes will hurt the local economy since foreign investors are likely to adopt a wait-and-see approach right after the policy takes effect. For example, the new rules allow a foreign investor to own an entire power-plant. This would negatively affect the nation’s technological innovation because local enterprises will lose control of power plants and their motivation to innovate. Also, the new rules bring more competitions to local businesses. As the government eases curbs on doing business in Indonesia, more foreign firms will set up businesses in Indonesia and will compete with the local firms in terms of labor and products. This would require the local enterprise to become competitive and to increase its efficiency. Moreover, some people argue that the new policy is not good for the balance of payment for the country. It might create a trade deficit on cross-country trade in the long run as foreign direct investment would continue to increase under the new rules.
As the global economy slows at this point, Indonesia's main job is to maintain its current economic level and slightly open the door for foreign investment. Although the new policy would bring challenges to the nation, Indonesia should really think about how to minimize the negative effects of the changes on its economy. What do you think of Indonesia's new foreign investment policy? Feel free to leave comment below.
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