The China Chamber of Commerce in Indonesia has formally written to President Prabowo Subianto, urging improvements to the business environment within the archipelago. This significant appeal comes as numerous Chinese companies have made substantial investments, contributing significantly to Indonesia’s economic growth, job creation, industrial advancement, and social responsibility initiatives across the nation.
The organization voiced broad concerns, highlighting that Chinese companies operating in Indonesia generally encounter challenges such as overly stringent regulations, excessive law enforcement, and pervasive issues of corruption and extortion by state authorities. These factors, the Chamber asserts, are profoundly disrupting normal business operations and directly eroding long-term investment confidence. Such issues have consequently generated widespread apprehension among Chinese investors regarding the current business climate and their future prospects in Indonesia, as stated in the letter.
Digging deeper, the Chamber detailed specific grievances, including frequent increases in taxes and fees, particularly mineral royalties, which have been repeatedly raised. Furthermore, intensive and often large-scale tax audits, sometimes amounting to tens of millions of US dollars, have created panic within the corporate community.
A second major concern is the proposed mandatory foreign exchange retention requirement. This policy mandates natural resource exporters to deposit 50 percent of their foreign exchange earnings in state-owned banks for a minimum of one year. This measure, the Chamber warns, would severely harm corporate liquidity and long-term operational viability for affected companies.
Thirdly, the drastic reduction in nickel ore quotas has caused considerable alarm. Since the beginning of this year, nickel ore mining quotas have been sharply cut, with reductions for large mines exceeding 70 percent. This cumulative decrease, totaling 30 million tons, is significantly disrupting the development of crucial downstream industries, including new energy and stainless steel production.
Fourth, the enforcement of forestry laws has become excessively strict. A Chinese investment company was recently hit with a record fine of US$180 million by the Indonesian Special Forest Management Task Force, on grounds of not possessing a valid Forest Area Utilization Permit (IPPKH).
Fifth, several large-scale projects face suspension. Authorities have reportedly intervened forcefully in company operations, alleging that major hydropower projects, invested in and constructed by Chinese firms, are damaging forest lands and exacerbating floods. This has led to orders to cease work and the imposition of sanctions.
Lastly, scrutiny over work visas has intensified. The approval process for work visas has become increasingly complex, accompanied by rising costs, higher thresholds, and unreasonable restrictions, such as the specification of particular work locations. These hurdles significantly impede the mobility of essential technical and managerial personnel.
Adding to these challenges, the Chamber noted that relevant government departments are reportedly considering additional measures. These potential changes include new export duties for certain products, the removal of incentives for electric vehicles, and reductions in tax relief for special economic zones.
The China Chamber of Commerce also highlighted a significant increase in the Nickel Ore Benchmark Price (HMP) and revised pricing rules for other key minerals, including cobalt and iron. These updates have resulted in a staggering 200 percent surge in nickel ore costs for businesses.
Consequently, Chinese companies are grappling with escalating production costs, ballooning operational losses, and a growing imbalance across the entire industrial supply chain. This domino effect threatens future investments, exports, and employment opportunities throughout the affected industries.
In light of these pressing issues, the China Chamber of Commerce in Indonesia has urged the government to foster a business environment that is stable, fair, transparent, and predictable. They seek a stabilization of policy expectations, standardization of law enforcement practices, and robust protection of the legitimate rights and interests of foreign investment companies.
Secondly, the Chamber calls upon competent authorities to actively listen to corporate grievances, promptly rectify unreasonable policies and enforcement practices, and effectively resolve the practical difficulties currently confronting businesses. Thirdly, they advocate for a significant enhancement of government-business communication mechanisms to ensure open and accessible channels for problem resolution.
Summary
The China Chamber of Commerce in Indonesia has formally requested President Prabowo Subianto to improve the local business environment, citing concerns over stringent regulations, corruption, and excessive law enforcement. Chinese investors are particularly troubled by rising taxes, mandatory foreign exchange retention policies, and significant cuts to nickel ore mining quotas. These challenges, along with recent fines and project suspensions, are reportedly undermining operational stability and investor confidence in Indonesia.
To address these issues, the Chamber advocates for a more transparent, predictable, and fair regulatory framework that protects the interests of foreign investors. They urge the government to standardize enforcement practices, rectify unreasonable policies, and establish more robust communication channels between officials and the business community. These measures are presented as essential to maintaining economic growth and protecting the industrial supply chain in the region.