A European investor is reportedly eyeing and planning to invest in the cotton processing sector in Indonesia, according to a press statement of Djoko Kurniawan, a business and investment observer of DK Consulting, here on Thursday.
The European investor will likely explore two possibilities, the first being to build a factory of its own using a foreign direct investment, or FDI, scheme while the second is to partner with a domestic company.
"I think the European investor will choose the second option by partnering with a local company. It is an effort to mitigate business risk in Indonesia," he noted.
If the plan is realized, it can be said that the European investor is categorically aggressive to conduct expansion in Indonesia owing to the fact that it was reported that Vivendi SA, a French media conglomerate, is planning to acquire parts of PT Global Mediacom (MNCN) share.
Apart from Vivendi that will try a television station, Michelin has earlier taken a step forward by realizing its investment.
It is partnering with PT Chnndra Asri Petrochemical (TPIA). The two developed a synthetic rubber factory, with an investment worth US$435 million.
Another French investor, Vinci, also cooperated with Indonesian state-owned firm Indonesian Tourism Development Cooperation (ITDC) and is planning to build a MotoGP circuit at the tourism area of Mandalika, Lombok, worth $1 billion.
Kurniawan believes the entry of foreign investors into Indonesia is a positive development, as it indicated that the investment climate in Indonesia is conducive.
Apart from its large population, Indonesia`s natural resources are still attractive to foreign investors.
"The entry of foreign investors can help develop the local industry because of the strength of the capital they have. This can happen if the local industry is involved as a local partner," Kurniawan noted.
The increase in European investment is a result of the Indonesian government`s seriousness in inviting foreign investors to invest in this country, one of the measures being through the provision of tax holiday facilities.
Meanwhile, Sulistyo Wibowo of the Directorate General of Taxation remarked that 12 investors will currently receive these facilities.
"The 12 investors invested Rp210.8 trillion," Wibowo noted.
Especially, in the cotton processing sector, companies not solely from Europe but also at least two other countries -- China and South Korea -- share similar interests to develop the cotton business in Indonesia.
This is due to the limited rules in each of these countries, so they cannot develop the cotton business there. The cotton processing sector in Indonesia, which is not included on the negative investment list, also helped attract foreign investors.
Cotton producers for beauty, health, and industries, integrated from upstream to downstream in Indonesia, are also limited, with only two firms, one of which is a public company, whose shares have been listed on the Indonesia Stock Exchange.