The Bilateral Investment Treaty (BIT) between Singapore and Indonesia has come into effect following a ratification conducted via a virtual meeting on Tuesday (9 March).
The treaty draws rules on the treatment of investors and investments from both countries, as well as grant investors from both countries added protection on their investments.
In 2018, BIT was signed by Minister for Trade and Industry Chan Chun Sing and Indonesia’s Minister for Foreign Affairs Retno Marsudi, and was witnessed by Prime Minister Lee Hsien Loong and Indonesian President Joko Widodo.
“The entry into force of the Singapore-Indonesia Bilateral Investment Treaty marks another important milestone in our countries’ longstanding economic relationship,” said Mr Chan.
He continued, “It will offer greater protection for Singapore investors venturing into the Indonesian market, and vice versa, safeguarding investments and boosting investors’ confidence. We look forward to the further strengthening of our bilateral economic ties and greater investment flows between our countries.”
Since 2014, Singapore has been Indonesia’s top foreign investor. Singapore’s total amount invested in Indonesia in 2020 was US$9.8 billion (S$13.2 billion).
Additionally, Indonesia was also one of the city-state’s top 10 trading partners last year, with bilateral trade hitting S$48.8 billion.
Investment between countries may grow up to 22 percent
While speaking at an online meeting with Mr Chan on Tuesday, Ms Retno pointed out that the BIT is an important milestone for bilateral ties, and that it would be an important boost to the economic recovery of both the countries amid the COVID-19 pandemic.
She also said it could potentially increase two-way investment by between 18 and 22 percent in the next five years, which translates to US$200 billion worth of investment yearly in the region by 2030.
“In this current difficult situation, the ratification of the BIT serves as an important economic boost to expedite economic recovery in our two countries. It could potentially enhance two-way investment ranging between 18 per cent to 22 per cent over the next five years.”
Pointing out that the treaty offers a “win-win” situation for both countries, Ms Retno expressed: “The treaty gives more certainty and confidence as it provides legal protection for Indonesian and Singaporean investors… (and) strikes a balance between the rights and obligations of investors and the host state of investment.”
She added, “This (treaty) reflects Indonesia and Singapore’s strong commitment towards open and fair economic cooperation, signalling reinforced hope and optimism to further explore business opportunities that benefit all of us.”
BIT gives investments extra protection
Mr Chan also stated that the treaty offers investments additional protection from things like discriminatory treatment and illegal expropriation.
“In the event of a dispute, the treaty provides investors recourse to international arbitration.
“I hope that the certainty provided by the treaty will promote greater investment flows between Singapore and Indonesia. This, in turn, would facilitate greater trade flows and closer business-to-business ties between our two countries,” he said.
Moreover, the BIT also complements other agreements like the updated Avoidance of Double Taxation Agreement, which can reduce the tax burdens on investors from both countries.
Mr Chan also stressed that Indonesia continues to be an attractive investment country for local companies and this can be seen by the amount of investments flowing into Kendal Industrial Park in Central Java, for example.
“As the digital economy grows in significance, it is also important that Singapore and Indonesia continue to find ways to deepen our partnership on this front,” he added, citing Nongsa Digital Park which has served as a “digital bridge” for tech companies in both Singapore and Indonesia.
“Singapore remains keen to collaborate with Indonesia to reinvigorate BBK’s economy, by facilitating new investment opportunities and addressing the various logistical, administrative and regulatory issues faced by businesses together.”
If that’s not all, Mr Chan also said that there is notable interest from Singapore firms in Indonesia’s Omnibus Law on Job Creation passed last year.
“The Indonesian government’s efforts at streamlining regulations and improving the quality and productivity of Indonesia’s workforce through this law will encourage greater potential investments,” he said.