Why Indonesia Needs Singapore

Summary

Singapore has become Southeast Asia's financial powerhouse, with Indonesia emerging as its largest foreign investment destination. The Singapore-Indonesia Bilateral Investment Treaty (BIT), updated in 2021, has been key in fostering strong trade and investment relations, with projections suggesting investments could exceed $200 billion by 2030. Key players like GIC and Temasek Holdings have invested heavily in Indonesian startups and sectors like retail, energy, and digital banking. Indonesia's improving business environment, especially the easing of foreign ownership limits, continues to attract substantial foreign investments, making it a prime destination for Singaporean capital.

Takeaways

• 😀 Singapore plays a pivotal role in driving investments across Southeast Asia, particularly in Indonesia.
• 😀 Indonesia is considered one of the most attractive destinations for foreign investments, especially from Singapore.
• 😀 Singapore has been the largest source of foreign investment in Indonesia since 2014, reaching over $9.8 billion USD in 2020.
• 😀 The bilateral relationship between Singapore and Indonesia is strengthened by the Singapore-Indonesia Bilateral Investment Treaty (BIT), first enacted in 2006 and updated in 2021.
• 😀 By 2030, the two nations’ investments could reach over $200 billion, further cementing their strong economic ties.
• 😀 Key drivers of investment between Singapore and Indonesia include private equity firms, Temasek, and Singapore’s sovereign wealth fund, GIC.
• 😀 GIC's investments in Indonesia span various sectors, including retail, entertainment, and real estate, with notable investments in Trans Retail, Nusantara Sejahtera Raya, and joint ventures with Rajawali.
• 😀 GIC is also a major investor in Indonesian startups, supporting companies like Bukalapak, Sicepat Express, and Bank Jago.
• 😀 Temasek Holdings has made significant investments in Indonesia's startups, with large stakes in Gojek and Tokopedia, which later merged into GoTo Group.
• 😀 Singapore's government has announced over $9.2 billion in investments focused on green initiatives like renewable energy and logistics development in Indonesia.
• 😀 Indonesia's improving business environment, such as better ease of doing business rankings, and the easing of foreign ownership limits, are driving increased foreign investment.

Q & A

Why is Singapore considered Southeast Asia’s most important financial country?

Singapore is regarded as Southeast Asia's most important financial hub due to its role in driving investments across the region, especially through institutional investors like GIC and Temasek, and its strategic position in global trade.

Why is Indonesia considered a major destination for Singaporean investment?

Indonesia is considered a key destination for Singaporean investment due to its growing economy, improving business environment, and its future potential as a regional powerhouse, making it an attractive market for foreign investment.

What is the role of the Singapore-Indonesia Bilateral Investment Treaty (BIT)?

The Singapore-Indonesia BIT, enacted in 2006 and updated in 2021, plays a critical role in promoting stronger relations between the two countries, enhancing trade, investments, and economic cooperation, particularly by providing a framework for foreign investments.

How much did Singapore invest in Indonesia in 2020, and how does it compare to other countries?

In 2020, Singapore invested over $9.8 billion in Indonesia, making it the largest foreign investor. This is significantly more than the investments from China ($4.8 billion) and Hong Kong ($3.5 billion).

What is the projected investment between Singapore and Indonesia by 2030?

By 2030, the investment between Singapore and Indonesia is expected to exceed $200 billion, indicating a deepening of economic ties between the two nations.

Who are the key players driving investments from Singapore into Indonesia?

The key players driving investments include Singapore's sovereign wealth funds, GIC and Temasek, along with private equity institutional investors. GIC, in particular, has made significant investments in various sectors, including retail and startups.

What are some notable investments made by GIC in Indonesia?

GIC has made significant investments in Indonesian companies such as Trans Retail (a supermarket chain), Nusantara Sejahtera Raya (a theater chain), and a joint property development project with Rajawali, collectively totaling over $1 billion.

How has Temasek Holdings contributed to investments in Indonesian startups?

Temasek Holdings has played a significant role in funding Indonesian startups, particularly through major investments in companies like Gojek and Tokopedia, which eventually merged to form the GoTo Group, making it a key player in the nation’s digital economy.

What other significant investment initiatives have been announced between Singapore and Indonesia?

The Singapore government has announced over $9.2 billion in investments focused on green projects like renewable energy and logistics infrastructure. These investments are expected to improve Indonesia’s trade capabilities and enhance the nations’ overall economic cooperation.

How has Indonesia’s business environment improved over the years?

Indonesia's business environment has improved notably, with its ease of doing business ranking rising from 129th in 2013 to 73rd in 2020. Key reforms such as the easing of foreign ownership limits have facilitated a more competitive market, encouraging foreign investments.