Indonesia’s bid to benefit from decoupling from China is hampered by tough rules: analysts

As trade tensions between China and the West continue to push companies to adopt a “China plus one” strategy – expanding operations to other countries to reduce their risks and dependence on the East Asian giant – countries such as India, Vietnam, Thailand and Malaysia have emerged. as significant beneficiaries of the wave of diversification.

Despite predictions that Indonesia will be one of the winners in supply chain changes, the country is struggling to emulate the success of its neighbors, according to Josua Pardede, chief economist at Permata Bank in Indonesia.

Multinational companies often had to navigate Indonesia’s complex business rules, Josua said. “On the contrary, Vietnam and Thailand have created a more favorable business environment with simplified procedures to attract foreign investment,” he added.

Sivage Dharma Negara, a senior fellow at Singapore’s ISEAS-Yusof Ishak Institute, said Indonesia needs to streamline the bureaucratic and regulatory environment in local and national governments to persuade foreign companies to invest.

“The country is known for its lengthy bureaucratic processes, which create additional costs and risks, thereby discouraging investment,” said the co-coordinator of the institute’s Indonesia studies program.