Singapore-Indonesia bilateral investment treaty takes effect

Singapore-Indonesia bilateral investment treaty takes effect

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  • The Singapore-Indonesia Bilateral Investment Treaty (BIT) establishes rules on the treatment of investors and investments from both countries
  • The treaty could boost two-way investment by between 18% to 22% over the next five years
  • Singapore was Indonesia’s largest foreign investor in 2020, with total investment of US$9.8 billion
  • Bilateral trade reached SGD48.8 billion in 2020

A bilateral investment treaty between Singapore and Indonesia that offers greater protection for Singapore businesses venturing into the Indonesian market and vice versa has come into force.

The Singapore-Indonesia Bilateral Investment Treaty (BIT), which establishes rules on the treatment of investors and investments from both countries, entered into force on March 9 with the exchange of the instruments of ratification.

Indonesian Foreign Minister Retno Marsudi said the treaty could potentially boost two-way investment by between 18% to 22% over the next five years.

The pact will also serve as an important step for the two nations to expedite economic recovery after COVID-19, she added.

The treaty, first signed in October 2018, is also the first of its kind to take effect in Indonesia after years of review by the government.

Singapore has been Indonesia’s largest foreign investor since 2014. In 2020, its investments in Indonesia reached a record US$9.8 billion, an increase of 6.5% year-on-year, despite the COVID-19 situation, according to Singapore’s Minister of Trade and Industry Chan Chun Sing.

Indonesia remained one of Singapore’s top 10 trading partners last year, with bilateral trade reaching SGD48.8 billion (US$36.2 billion), data from Singapore’s Ministry of Trade and Industry showed.

Chan said the treaty provides additional protection for Indonesia’s investments in Singapore, and Singapore’s investments in Indonesia. This includes protection from discriminatory treatment and illegal expropriation. In the event of a dispute, the BIT provides investors recourse to international arbitration.

Singapore and Indonesia also signed the updated Avoidance of Double Taxation Agreement (DTA) in February 2020.  Once it enters into force, the updated DTA will lower the tax burdens on investors from Singapore and Indonesia when they invest in each other’s countries, Chan said.

Singaporean companies have also shown significant interest in Indonesia’s Omnibus Law on Job Creation, enacted in November last year with the aim to streamline regulations and improve the quality and productivity of Indonesia’s workforce.

“Together with the Omnibus Law, the BIT and DTA will strengthen the overall regulatory framework for investments between Singapore and Indonesia and continue to boost the confidence of our business communities as they venture into each other’s markets. This will allow Singapore and Indonesia to leverage each other’s strengths towards post-pandemic economic recovery,” Chan said.

Photo from Singapore Trade Minister Chan Chun Sing’s Facebook page

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