CNBC once assessed: "Indonesia is facing the fact that it cannot compete with its neighboring country, Vietnam, which is far behind in many fields, from foreign investment to export."
Comparing the indices
Which country would companies moving out of China prefer?
Looking at the figures, it can be seen that Vietnam has advantages over Indonesia in terms of readiness for automation, labor costs, more attractive corporate income tax, a better logistics capacity, and more free trade agreements, particularly the recent EVFTA.
However, port infrastructure is still lagging behind Indonesia. In terms of this, Indonesia has an advantage over Vietnam with the wider sea border. Not only that, Indonesian Ambassador to Vietnam, but Mr. Ibnu Hadi also revealed: "The process of granting investment licenses to foreigners in Vietnam is really easy. Therefore, the investment can take place quickly and more favorable.
If a foreign investor enters Vietnam, it only takes 2 licenses, investment approval, and business registration, "he told CNBC Indonesia. "It is important for us to accelerate trade cooperation, for example through the Free Trade Agreement (FTA), and to expand the market so that we do not fall behind."
Of the 56 companies that moved production out of China between April 2018 and August 2019, 26 companies moved to Vietnam, 11 companies moved to Taiwan, 8 companies moved to Thailand, and only 2 companies came to Indonesia.
According to CNBC, although Indonesia's GDP growth rate is also relatively high compared to other major economies around the globe, economists often agree that the country is operating below its potential to attract FDI, so it is called "a sleeping giant".
