Investing in the “One Belt, One Road” Countries: Political Risks in Indonesia

Indonesia has now become the biggest and fastest-growing economy in Southeast Asia; it has maintained a growing momentum despite the recent global financial crisis. Given the importance of Indonesia, China mapped the latter into its development roadmap to promote the “One Belt, One Road” initiative. For Chinese investors, Indonesia is an attractive investment destination for its:

  • Sufficient labor force, large market size, and lower labor cost;
  • Long coastline and a number of maritime transportation hubs; 
  • Investor friendly climate and stable financial market; and
  • Abundant natural resources.

An increasing number of Chinese enterprises have begun to invest in Indonesia, and their investments have covered the manufacturing, agricultural and service sectors. Given the global political trend and the domestic situation of Indonesia, the chance of political instability in Indonesia is also high. Investors are advised be aware of the following potential political risks:

  • Nationalist and anti-Chinese sentiment in the country;
  • Policy instability and severe corruption in government agencies; and 
  • Possible terrorist threats.
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