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Singapore Manufacturers Keen to Expand in Indonesia
Irvan Tisnabudi | March 07, 2010

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With Singapore’s economy expected to rebound this year, manufacturers there are gearing up to invest more in Indonesia to capitalize on the archipelago’s large labor pool and robust growth, the head of the Singapore Manufacturers’ Federation said on Friday.

“Indonesia is becoming a more and more attractive place for us to invest in,” Renny Yeo said. “We can take advantage of Indonesia’s large population.”

The federation is made up of more than 2,000 Singaporean manufacturing companies.

Singapore, Indonesia’s largest source of foreign investment, was hit hard by the global economic downturn. Its economy contracted 2 percent in 2009 but is predicted to grow by 3.5 percent this year.

The onset of the financial crisis in 2008 saw the amount of Singaporean foreign direct investment in Indonesia plummet to $1.49 billion from $3.75 billion in 2007, according to data from the Investment Coordinating Board (BKPM). Last year, Singaporean investment here rebounded to $4.34 billion, around 40 percent of total foreign direct investment in the country. With its economy recovering further, the level of investment is expected to accelerate this year.

Yeo said Singaporean manufacturers were interested in investing in Indonesia’s small- and medium-sized enterprise sector given forecasts that it would grow rapidly.

“With the Singapore Manufacturers Federation eyeing more investment in Indonesia, it will cause a multiplier effect [encouraging other investment],” said Iwan Dermawan Hanafi, chairman of the Singapore committee of the Indonesian Chamber of Commerce and Industry (Kadin).

Iwan said there were a number of sectors that Singaporean investors were particularly interested in, including chemicals, the food industry, storage and the energy sector.

Aviliani, an economist at the Institute for Development of Economics and Finance, said that while Singaporean companies invested heavily in Indonesia, they added little to the non-service sectors of the Indonesian economy.

“Investment from Singapore is what I call bad investment,” he said. Most of the money went into companies listed on the stock exchange and did not involve the transfer of expertise, he added.