Indonesia recognising expansion potential

July 29, 2022 | 09:00
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Vietnam and Indonesia are working together to increase their business ties amid their pursuit of a strategy for accelerating economic recovery, with both sides expected to venture into new opportunities.

The Consulate General of Indonesia in Ho Chi Minh City will hold a dedicated business forum event titled “Remarkable Business Indonesia-Vietnam” on July 29, in a bid to help companies from both nations to explore investment possibilities in their respective markets.

“This year offers great momentum for economic recovery,” said the Consulate General in a statement released last week. “Therefore, it is imperative to encourage more Indonesian investors’ interest to further contribute to the economic recovery by giving recognition to those existing and growing companies.”

Indonesia recognising expansion potential
Chairman of the HCMC People’s Committee Phan Van Mai (R) receives Indonesian Ambassador to Vietnam Denny Abdi./ photo: sggpnews

Last week, Vietnamese Minister of Foreign Affairs Bui Thanh Son paid an official visit to Indonesia and hosted the fourth Vietnam-Indonesia Joint Commission for Bilateral Cooperation. The event aimed to assess the overall outcomes of cooperation in all sectors, from politics, defence, investment, and trade to culture and social affairs.

Both sides agreed on new plans to facilitate the two nations’ enterprises to conduct trade and business activities, and seek investment opportunities to expand and diversify investment, especially in the sectors of fishery, infrastucture construction, renewable energy, high technology, and digital transformation. Both sides will also soon sign an MoU on rice cooperation for the next four years. Indonesia will also facilitate Vietnamese Halal products in its market. The pair will also consider opening new air routes in service of their tourism, trade, and investment ties.

According to the Indonesian Embassy to Vietnam, many businesses are targeting Vietnam as an attractive business destination. They operate in a raft of industries such as coal, education, automobile components, infrastructure, property, consumer products, and agriculture.

Coal miner Intra Asia Indonesia is reported to be working with Vietnamese agencies about a plan to construct a $1 billion coal port in Vietnam’s central region. A few years ago, this group inked an MoU on forging cooperation in coal trading and seaport investment with Hong Phat Group. The delay in implementation of this project is ascribed to some difficulties in procedures. The port, with a designed capacity of 15-20 million tonnes of coal per year, will be largely used for cargo and logistics that will serve export and import between both nations, especially coal.

Meanwhile, Indonesian animal feed producer Japfa Comfeed Vietnam is expected to continue pumping money into this country. At the end of 2020, the group was granted an investment certificate to invest more than $40 million into an animal livestock production project worth $230 million in the southern province of Binh Phuoc.

In addition to this, the company is working with the world’s leading companies in breed genetic technology, building and developing a system of breeding farms for great-grandparents, grandparents, and parents to create sources suitable for local conditions with competitive price in Binh Phuoc, with the number of employees by 2025 set to be over 1,000.

Arif Widjaja, general director of Japfa Comfeed Vietnam, told VIR, “This $230 million project demonstrates our long-term commitment in business and investment in Vietnam. Being one of Japfa’s three key markets in Asia, Vietnam is always our prime priority in the group’s expansion strategy.”

According to the Consulate General of Indonesia, there are around 40 Indonesian companies in Vietnam, with most located in the southern region. The sectors range from spare parts, manufacturing products, fast-moving consumer goods, chemicals, plastic and aluminium, pharmaceuticals, and cosmetics to transportation, travel, and logistics. These companies produce goods and services for the Vietnamese market, as well as for exports.

“As one of the fastest-growing economies in the region, driven by export-oriented manufacturing, foreign direct investment, and increasingly strong domestic demand, Vietnam is attracting the attention of investors worldwide,” the Consulate General said. “Despite the disruptions over the past couple of years, many Indonesian companies are still eager to expand their footprint in Vietnam, primarily through mergers and acquisitions.”

Many groups have been successfully operating in Vietnam, including Thang Long Cement, Ciputra Group, Dynaplast Vietnam, Japfa Comfeed, Akebono Brake Astra Vietnam, and Vietmindo Energitama. As of June 20, Vietnam had 101 valid projects by Indonesian investors registered at $618 million. Vietnam also has 17 valid ventures registered at $59 million in Indonesia, operating in commerce, IT, and agriculture.

Denny Abdi - Indonesian Ambassador to Vietnam

Indonesia recognising expansion potential

Vietnam continues to be an attractive destination for foreign enterprises and its position is considered strategic for the enhancement of mutually beneficial economic cooperation. Vietnam can serve as an entry point for Indonesian investors to its domestic market as well as to surrounding ASEAN countries by utilising tariff preferences.

In addition, Vietnam’s trading relations with partners such as the United States, EU, and China are significant and increasing. Indonesia and Vietnam also share several conditions that can support the enhancement of the economic relationship – these include a huge population, increasing economic achievements, rising purchasing power parity, and geographical closeness to other member states in ASEAN. Moreover, some Indonesian companies have been operating in Vietnam for long periods of time to benefit the economic development of Vietnam. Indonesia will continue to encourage its businesses to capitalise on Vietnam’s economic development. Indonesia has also invited Vietnamese groups to invest in Indonesia in the fields of fisheries, agriculture, and other export commodities.

Nevertheless, Indonesia and Vietnam have not been able to utilise maximally traditional relations and closeness towards concrete cooperation, especially in the economy and commerce. Vietnam’s investment and tourism flows to Indonesia have also been slow. Meanwhile, Indonesian entrepreneurs have not fully utilised the economic potential, market, and investment opportunities offered by Vietnam.

Indonesian investors are interested in infrastructure and property. The Vietnamese government is also undertaking promotional activities to attract foreign investors into the development of the property sector by facilitating the construction of facilities and infrastructure, allocation of land and stabilisation of land prices, and especially improving the transparency and simplification of administrative procedures.

By Thanh Thu

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