JAKARTA, INDONESIA — Indonesia and Singapore recently strengthened their economic cooperation by ratifying a bilateral investment treaty (BIT), which was signed in October 2018 in Bali.
During the virtual meeting earlier this week on 9 Mar, Indonesia’s Foreign Minister Retno Marsudi and Singapore’s Trade Minister Chan Chun Sing announced that the BIT had taken into effect.
“The entry into force of the Singapore-Indonesia Bilateral Investment Treaty (BIT) marks another important milestone in our countries’ longstanding economic relationship,” Chan stated.
Retno said that the treaty would potentially push the recovery of both sides’ economy.
Here are four key points from the ratification of the BIT.
Singapore is Indonesia’s largest investor
Last year, Singapore’s investment value in Indonesia reached US$ 9.8 billion, up 50.76 per cent from US$ 6.5 billion in 2019, official data showed.
Data from the Investment Coordinating Agency (BKPM) stated that Singapore’s investment accounted for 40 per cent of foreign investment in Indonesia in the first quarter of 2020.
The agency’s deputy director for investment climate development, Farah Ratnadewi Indriani told Bisnis that not all of the investments came from Singapore.
Countries like China, the U.S, and several European countries also invest in Indonesia through their Singapore-based hubs.
BIT stipulates investors’ rights and obligations in more detail
The BIT is the first effective bilateral investment agreement after a careful review by the Indonesian government.
Retno added that the latest BIT is a reference to other similar agreements as the treaty provides certainty and legal protection for investors from both countries.
Also, the BIT affirms that both countries have access to international arbitration to settle the dispute.
“The treaty gives more certainty and confidence as it provides legal protection for Indonesian and Singaporean investors … It strikes a balance between the rights and obligations of investors and the host state of investment,” Retno stated.
Besides BIT, both Indonesia and Singapore have applied Travel Corridor Agreement (TCA) that opens doors for economic recovery.
Besides protection and dispute settlement, the BIT also includes several key changes in terms of application and restriction.
Unlike the previous agreement—which expired in 2016—the current BIT stipulates types of unprotected investments, such as government procurement, taxation matter, and grants and subsidies from other countries.
The treaty only applies to both sides after the date of exchange of the instrument of ratification.
Furthermore, the BIT enables a country to restrict investment-related payments and transfers if it experiences financial difficulties, according to Mondaq.
Chan Chun Sing cited Singapore’s investments in Central Java and Riau Island
During the virtual meeting, Chan Chun Sing hailed his country’s investment in Kendal Industrial Park (KIP) in Central Java and Nongsa Digital Park in Riau Island.
“KIP has made a progress since its opening in 2016, with nearly 9,000 job opportunities and investment worth US$ 1.37 billion. So far, there are 60 committed tenants in KIP,” the minister said.
Nongsa Digital Park is seen as a digital bridge for technology firms in Singapore and Indonesia. There have been around 150 start-ups operating there specialising in various sectors since its launching in 2018.
