Singaporean Business in Indonesia

by | May 19, 2021 | Study Insight | 0 comments

Singapore Business in Banking, Agribusiness, and Consumer Goods sectors in Indonesian Market.

Indonesia-Singapore had been in a friendly relationship for 54 years. Many things have been achieved by both countries in economic cooperation. For example, BreadTalk, Singapore’s consumer goods company successfully has more than 170 branches in Indonesia.

Singapore and Indonesia signed the second bilateral investment treaty (BIT) as the instrument of ratification in March 2021, while the first treaty was already signed back in October 2018, in Bali. This treaty was expected to accelerate the two-way investment flows by between 18% and 22%, and should be aimed in 2023, as the treaty applied to a 5 years program.

Indonesia’s Foreign Affairs Minister, Retno Marsudi stated in the online press about this second treaty, the ratification of the BIT serves as an important economic boost to expedite economic recovery in the two countries. This statement strengthened by the Singapore’s Trade and Industry Minister, Chan Chun Sing, about the BIT provided sufficient protection for Indonesia and Singapore for each other’s country investment. Singapore also remained as Indonesia’s largest investor, worth to USD 9.8 billions according to Indonesia’s Investment Coordinating Board (BKPM).

Singapore Business Overview in Indonesia

In 2021, Indonesia-Singapore had been in a friendly relationship for 54 years. In this age of long friendship, many things have been achieved by both countries. To strengthen bilateral economic cooperation, the Governments of Indonesia and Singapore held a bilateral meeting held at the office of the Coordinating Ministry for Economic Affairs in March. The meeting resulted in six Bilateral Economic Working Groups (6WG), namely:

  1. Batam-Bintan- Karimun and other Special Economic Zones (KEK), 
  2. Investment, 
  3. Employment, 
  4. Transportation, 
  5. Agribusiness, and 
  6. Tourism.

According to Singapore’s Ambassador to Indonesia, Anil Kumar Nayar, Singapore remains the largest investor in Indonesia despite two countries being affected by the COVID-19 pandemic since last year. Singapore has been the largest investor in Indonesia since 2014. The Indonesian Investment Coordinating Board recorded the realization of Singapore’s investment to Indonesia almost reaching USD 10 billion last year.

During the pandemic, Singapore’s high investment in Indonesia was influenced by the Singapore-Indonesia Investment Treaty and cooperation between the Monetary Authority of Singapore and Bank Indonesia. The monetary authorities of the two countries announced financial cooperation worth up to USD 10 billion for one year. 

Singapore’s business community in last February discussion said they were optimistic that Indonesia’s economy would recover quickly and still promise investment goals. Because the Government of Indonesia has tried to improve the investment climate by passing Law No. 11 on Copyright Work. In addition to the new policy, other factors can accelerate economic recovery in Indonesia. That is a monetary policy supported by Bank Indonesia, which has lowered interest rates to a low of 3.5%. With these two policies, Indonesia hopes to attract more foreign direct investment. 

In addition to the rapid pace of investment, the pace of trade is also very rapid. Trade is the common motivation of the two countries of foreign relations. Located in the Strait of Malacca, Singapore serves as one of the main world trade centers. Thus, trade with Singapore is important for Indonesia. Likewise, Indonesian entrepreneurs are also important to Singapore. Indonesia’s non-oil and gas trade balance with Singapore recorded a surplus of USD 0.4 billion in 2020.

Economic Agreement between Singapore and Indonesia

The economic agreement between Singapore and Indonesia realized in the Indonesia-Singapore Bilateral Investment Treaty (BIT) which was already stated in the previous section, this agreement hopefully would provide protection for both countries’ investors and also strikes a balance between the rights and obligations of investors and the host state of investment. The treaty also expectedly would lead to facilitate greater trade flows and closer business-to-business ties between our two countries in certain sectors

Singapore cited their Nongsa Digital Park which has served as a “digital bridge” for tech companies to penetrate in both Singapore and Indonesia, firstly located in Bintan, Batam and Karimun (BBK) region as our strongest bilateral economic ties area for Singapore and Indonesia. This condition also attracted Singaporean investors to survey another industrial location for Singaporean industries that might direct to Kendal Integrated Industrial Zone in Central Java, Indonesia.

Singapore’s Trade to Indonesia Statistic

Source: Singapore’s Department of Statistics

According to the infographics of Singapore’s Department of Statistics, the size of the bubble reflects the total merchandise trade value with the trading partner. The green sign remarked for the net exporter which leads to Singapore’s value on its export to Indonesia. It is stated that the trade performance of Singaporean export activity is worth SGD 48.8 billion, and equivalent to IDR 544,02 trillion in 2020.

Singapore and Indonesia Business Sector

There are already many Singaporean companies expanding their market in Indonesia. From the banking sector, agribusiness, consumer goods, industrials, and others. There are three major banking companies in Singapore that are developing their markets in Indonesia. 

Banking 

First, DBS Group entered the Indonesian market in 1989. DBS Indonesia was recognized as “Best Wealth Manager in Indonesia” by The Asset and “Best Foreign Exchange Bank in Indonesia” by Global Finance, DBS Indonesia also got an ‘Excellent’ predicate for the category of Assets of 50 Trillion IDR to below 100 Trillion IDR by Infobank. Second, OCBC Bank entered the Indonesian market in 1941. OCBC was awarded ‘The Best Bank of Risk Management 2019’ by Infobank. Third, UOB Bank entered the Indonesian market in 1956. UOB was awarded ‘The 3rd Rank Best of The Best Companies’ and ‘The 2nd Rank Banking Companies’ by SWA Magazine & NBO Group in 2019.

Agribusiness

Furthermore, from the agribusiness sector, there is Wilmar International which is a group of Singapore agribusiness companies established in 1991. It was one of the largest listed companies by market capitalization on the Singapore Stock Exchange in 2010. In Indonesia, it is the second-largest palm oil supplier for palm oil. In 2018, Wilmar International was awarded the best export foreign exchange contributor corporation from Bank Indonesia (BI).

Consumer Goods

Singapore businesses in the consumer goods sector seem to see the potential of market expansion in Indonesia as quite large. Eight large consumer goods companies have opened branches in Indonesia. These companies are Ayam Brand, Bee Cheng Hiang, Kuofu, Tee Yih Jia, Ya Kun Kaya, Twelve Cupcakes, Yeo Hiap Seng, and the largest of them is BreadTalk. 

BreadTalk is considered a successful entry into the Indonesian market. The company entered Indonesia in 2003. At the beginning of its opening in Indonesia, precisely at Mall Kelapa Gading 3, the enthusiasm of the Indonesian was massive. So, Johnny and Tina Andrean, BreadTalk franchise owners in Indonesia opened their branches at several points in The City of Jakarta. Until now, there are more than 170 BreadTalk branches in Indonesia. BreadTalk (Indonesia) won the Best Seller Product version of Marketing magazine for its signature product, namely C’s Floss and Fire Floss which sold about 20,000 pieces per day in 2004. 

Bright Indonesia’s Solution for Foreign Business

Indonesia nowadays opened and encouraged foreign businesses including Singaporean companies to enter their business in the Indonesian market. The economic agreement of the Bilateral Investment Treaty (BIT) aimed to provide protection for Singapore and Indonesia’s business and two-way connection through investment and trade. Both countries have their own regulations to establish the company in order to spread their business. To enter Indonesia’s industrial market, it is crucial to have the right local partner.

BRIGHT Indonesia will help Singaporean businesses to enter Indonesia’s market through services such as Business Partnership Engagement, Management and Strategy Consulting, Business Registration and Establishment, and  Foreign Direct Investment Promotion. The services will help your business to:

  1. Secure the agreement between Singaporean companies and future Indonesian business partners by providing a list of potentially suitable partners, arrange business meetings, and act as a liaison. 
  2. Support Singaporean companies from the private sector with developing corporate or business unit strategies or helping your company from public sector organizations with public policy.
  3. Help Singaporean companies obtain the work and stay permit for your foreign employee in the Indonesian office: expatriates utilization plan (RPTKA), expatriates utilization permit (IMTA), and limited stay permit (KITAS).
  4. Link Singaporean companies both from the private and public sectors in global foreign direct investment (FDI) through training and assisting your company in entering FDI source countries to gather investment for your company’s local markets.

With exceptional local market expertise and networks in Southeast Asia, BRIGHT Indonesia will offer excellent services designed specifically to achieve your company’s goal. 

For more information, email info@brightindonesia.net.

This article is written by Galih Akmal Latifand Sintya Nur Muftiana.

0 Comments

Submit a Comment

Your email address will not be published.