A Year of Deeper Relationships
For 2016, AmCham broadened its reach and engagement with government
By A. Lin Neumann
Tuesday, December 13, 2016
In 2016, the government of President Joko “Jokowi” Widodo came of age. The transitional feeling of 2015 has been replaced by an administration that is confident of its political standing and direction. Uncertainty about the legislature and a fractious cabinet is largely gone. We now see a president more fully in control of the levers of power. His majority in the House of Representatives has been consolidated and the message to the cabinet after the August reshuffle was clear: there is room for only one leader.
The message from the man at the top has seemed clear since day one of his administration: Indonesia needs greater foreign investment if it is going to achieve the ambitious 7 percent growth target the president set when he took office. Despite the fact, it has been difficult to get ministries to move in a coordinated fashion and regulations are still issued that hamper investment. From work permit hurdles to restrictions on marketing child nutrition products and long delays in getting approvals for new pharmaceuticals the gauntlet can be difficult, time consuming and ultimately costly to untangle.
In the past year, the most dramatic example of reforms were the changes made to the Negative Investment List (DNI), particularly in the creative economy sector, which is now open to 100 percent foreign ownership. In the past year, AmCham Indonesia, together with our partners in the US Chamber of Commerce, held a special Creative Economy Mission under the US-Indonesia Investment Initiative to bring major companies into face-to-face talks with the government on how to build a road map for creative industry investment. As with any reform, the details of opening the sector can be tricky, with new roadblocks suddenly appearing even as old ones come down. We are grateful that in the case of the creative sector, numerous officials have asked AmCham to be part of the process going forward.
We also continue to urge the government to scrap the DNI altogether. Why begin the investment discussion with a list of restrictions? We believe Indonesia could benefit by easing restrictions on foreign investment in areas like education and health care and that complex rules and often contradictory permitting regimes hold back the economy. The president and his economic advisors know this, of course, but the last two years have shown that creating an attitude of openness is enormously difficult.
The other big headline issue this past year was the tax amnesty program. AmCham’s Tax Committee and two of our Platinum companies, EY and PwC, helped lead the charge in informing our members that the program also applies to expatriates. Our bigger hope is that the amnesty will broaden the government’s revenue base and lead to changes in tax collection procedures that sometimes put an undue burden on large foreign investors.
Tax and the DNI are just two of the areas where US companies have concerns. Legal certainty and contract sanctity also remain an issue. The business community is pleased to see progress on infrastructure but much more remains to be done. We are watching with keen interest how the new Patent Law will be implemented. Another area of interest is the process of implementing the sweeping 2014 Halal Law. Both local and foreign investors have seemed somewhat relieved that this sensitive and complex issue is being given thoughtful attention at the highest reaches of government.
US-Indonesia Investment Summit 2016
Nowhere else did we feel the support of the government more than during the 2016 US-Indonesia Investment Summit, held in conjunction with the US Chamber of Commerce on September 15 and co-sponsored by the Indonesia Investment Coordinating Board (BKPM). On the day itself, eight cabinet ministers led by coordinating economy minister Darmin Nasution, who personally represented the president, spoke both publicly and privately with the US companies that sponsored the event. One major lesson was that the government increasingly sees AmCham Indonesia as a partner in the investment and regulatory discussion.
For the fourth straight year, we also produced a major investment report, only this year with a twist. “Vital & Growing: Adding Up the US-Indonesia Economic Relationship,” goes far beyond foreign direct investment (FDI) to consider the full impact of the US-Indonesia economic relationship. Using hard data, we considered retail sales, financial services, government revenues, trade and FDI to come up with a figure of roughly $90 billion for 2014, the last year with full data available. This translates to about 10 percent of Indonesia’s GDP and underscores the crucial importance of the US-Indonesia economic relationship.
AmCham goes to Washington
AmCham also held its annual Doorknock visit to Washington, DC in April, stopping in to see US officials in key departments, spending a day on Capitol Hill, meeting companies and engaging with think tanks and institutions concerned with Indonesia. President Brian Arnold, board members Jim Castle and Adam Schwarz and myself found a warm reception during our stay, which included a dinner at the residence of the Indonesian Ambassador to the US. The highlight for me this year was a meeting with Sri Mulyani Indrawati, who was then the Managing Director of the World Bank. In retrospect and given the scope of our conversation it hardly seemed surprising when she took up the post of finance minister during the August cabinet reshuffle.
Committees at the center
The heart of AmCham’s work lies with our committees, whose members stay engaged on regulatory issues, community activities, the business climate and many other issues. Our Tax Committee got energized this year over the tax amnesty. The ICT committee remained active on local content requirements, data center localization and over the top (OTT) services regulations. Our IPR committee was restarted with an initial focus on the Patent Law. Our Young Professionals put on the Amazing Big Durian Race again this year and the Education Committee held a successful career fair late in the year at @america.
Other committees were active on Halal labeling, pharmaceuticals, the security situation, power generation and environmental issues. Special mention goes to our venerable Services Committee, which meets bi-monthly and is perhaps the best forum in Jakarta for ground-level business information. The Golf Committee again staged a terrific Thanksgiving Day tournament that was sold out as usual.
While we held our usual dialogues with Indonesian government officials throughout the year as a way to untangle problems for companies, 2016 also saw AmCham being sought out for discussions with visiting political figures from the United States who were eager to share views with business leaders here.
In March, former governor of Utah and Republican presidential candidate Jon Huntsman joined us for an AmCham breakfast. In September, Steve Forbes, the former GOP presidential contender and CEO of Forbes Magazine, was here for an AmCham lunch co-sponsored by Forbes magazine. Just a week before the election in November, Edelman brought Republican strategist Steve Schmidt to town and we joined a breakfast with him. The 2008 campaign manager for John McCain, gave us a window into how some Republicans were viewing the closing days of the wild campaign. The conversations kept AmCham feeling close to the action back in the US.
Throughout the year AmCham was available to the media, both local and foreign, for analysis, background information and on-the-record comment. This is another way to get our messages out to the public.
The AmCham leadership is frequently quoted in leading publications like The Wall Street Journal, Reuters and The New York Times. In 2016, we also appeared on the BBC, Channel News Asia and MNC English TV. Our investment report garnered significant comment in the local press and the AmCham online biweekly newsletter has become a popular source of thought-provoking information.
Many thanks to you all
I began my stint as AmCham’s Managing Director at roughly the same time President Widodo came into office. We have both had a lot to learn. Moving from a long career as a journalist to help lead a major business association was an adjustment but I now feel very comfortable in my AmCham hat. The members, our Board, the leadership of AmCham and the amazing office staff led by Executive Director Sarah Howe have been wonderful to work with.
Finally, a special note of appreciation goes to our Platinum Benefactors – BCA, Cargill, Caterpillar, Chevron, Coca-Cola, ExxonMobil, EY, Freeport, General Motors, Mead Johnson, PwC and HM Sampoerna – who make much of our work possible. In addition, the numerous companies who joined the Investment Initiative – more than 20 altogether – made our very successful Investment Summit possible.