The China Chamber of Commerce in Indonesia has formally petitioned President Prabowo Subianto to improve the nation’s business climate, citing a surge in concerns among Chinese investors regarding policy uncertainty, law enforcement, and regulatory hurdles.
In a letter addressed to the President, the chamber emphasized that while Chinese companies have invested heavily in Indonesia—contributing to job creation, industrial development, and economic growth—they are increasingly encountering severe operational difficulties. The organization specifically pointed to corruption, extortion involving certain authorities, and “overly strict regulations” as primary drivers of instability.
According to the letter, “These problems have severely disrupted normal business operations, directly undermined long-term investment confidence, and caused widespread concern among Chinese-invested enterprises regarding the current business environment and their future development in Indonesia.”
Key Grievances and Operational Hurdles
The chamber outlined six primary areas where Chinese-invested enterprises are facing significant pressure:
- Taxation and Royalties: The organization reported repeated increases in fees and mineral resource royalties, alongside intensive tax audits with some claims reaching tens of millions of US dollars.
- Foreign Exchange Restrictions: The chamber criticized a policy requiring natural resource exporters to deposit 50 percent of their export earnings in state-owned banks for a minimum of one year, warning this could severely impact company liquidity.
- Mining Quotas: Since the start of the year, nickel ore mining quotas for major mines have reportedly been cut by more than 70 percent, totaling a reduction of 30 million tons. This has disrupted stainless steel production and new energy materials.
- Forestry Enforcement: The letter cited “excessively strict” enforcement, including a record US$180 million fine imposed by Indonesia’s Special Task Force for Forest Management on companies accused of lacking valid forest area borrow-and-use permits (IPPKH).
- Project Suspensions: Several large hydropower projects have been suspended following government accusations that the projects damaged forest areas and worsened flooding.
- Labor and Visas: The chamber noted that work permit approvals have become more complicated, involving higher costs and restrictions on work locations that limit the mobility of managerial and technical staff.
the chamber highlighted that revised pricing rules for minerals—including cobalt, iron, and nickel ore—have triggered a 200 percent surge in nickel ore costs.
Economic Implications
The significance of these challenges extends beyond individual company losses. The chamber warned that the combination of rising production costs, supply chain imbalances, and mounting operational losses is beginning to impact future employment, exports, and overall investment levels.
The situation is further complicated by potential upcoming policy shifts. The letter noted that government departments are considering additional measures, including the reduction of tax relief for special economic zones, the abolition of electric vehicle incentives, and the introduction of new export duties on certain products.
Potential Outlook
The China Chamber of Commerce has urged the Indonesian government to standardize law enforcement practices and establish a more transparent, predictable business environment to protect the legal rights of foreign investors.
Depending on the government’s response, several scenarios may unfold. A revision of “unreasonable policies” and the improvement of communication mechanisms could potentially stabilize investor confidence. Conversely, if the reported liquidity issues and quota reductions persist, it may lead to further operational losses for Chinese-invested enterprises. The chamber expressed hope that President Prabowo’s intervention could ensure that economic cooperation continues to develop “steadily and soundly.”
