Is Indonesia a Good Place to Start a Business?
Corporate Secretary Service – Why are foreign investors interested in Indonesia as an investment destination? Among a number of countries, what is Indonesia’s potential that attracts foreign investors? First of all, let us explain what is meant by investment. According to Article 1 Number 1 of Law 25/2007, investment includes all forms of investment activities undertaken by both domestic and foreign investors to conduct business in the territory of the Republic of Indonesia.
To dissect the answer to the question of why foreign investors are interested in investing in Indonesia. Various studies on foreign investment show that the motive of a company to invest in a country is to seek profit, according to Prof. Erman Rajagukguk. Profit is derived from several factors. These factors include
Cheap Labor Wages
Most developing countries have abundant labor with wage rates that are much lower than the wage rates for the same work in developed countries. By investing in developing countries that have abundant labor, investors can develop their capital or business at a low cost or expense.
Proximity to Sources of Raw Materials
In the production process, raw materials are an essential factor. Most developed countries have minimal raw materials, while developing countries have untapped raw materials. For this reason, developed countries invest in moving their industries to developing countries to take advantage of the proximity of raw materials in the sense that there is no need to import raw materials, which is time consuming and costly.
Finding New Markets
Developing countries are very effective markets for marketing the products of developed countries. The presence of new markets will bring its benefits to the foreign investor country. A huge population, generally peaceful and dynamically adapting to progress, is one of the potential attractions for investors.
Read Also: What is the Most Profitable Business in Indonesia?
Profits from Technology Transfer
Foreign investment is often followed by technology transfer. Developed countries initially control the technology and in subsequent developments it is used by developing and underdeveloped countries. It is in this process of use that technology transfer occurs. Developed countries carry out technological transformation to socialize technological culture and increase financial benefits. On the other hand, developing countries are willing to accept technological transformation to speed up their development.
Selling Raw Materials and Parts
Foreign investors can also benefit from selling raw materials. This is related to the characteristic of developing countries, which cannot produce enough raw materials to turn into finished products. In addition, foreign investment can also benefit from the sale of spare parts. The most common investment related to spare parts is in the automobile industry.
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