PAPER

INTERNATIONAL BUSINESS
Comparison the situation foreign direct investment (FDI) in Indonesia and Singapore

Arrange by:
Name: NUR MASYITHA
Major: Management (International)
NIM: 108081100008

FACULTY OF ECONOMIC AND BUSINESS

SYARIF HIDAYATULLAH
JAKARTA

Abstract
Comparison the situation foreign direct investment (FDI) in Indonesia and Singapore
Nur masyitha

FDI or Foreign Direct Investment is any form of investment that earns interest in
enterprises which function outside of the domestic territory of the investor.Increasing foreign
investment can be used as one measure of growing economic globalization. For example of
among countries that are listed in the FDI is Indonesia and Singapore. Ever since Indonesia's
independence, foreign companies have made major investments in Indonesia to develop its
resources, build infrastructure, establish manufacturing facilities for export and provide
products and services for the domestic market and how if compare situation foreign direct
investment with singapore country so of course there are differences . This essay has the
purpose to compare situation foreign direct investment in Indonesia with Singapore
condition. This essay has three sections. Firstly introductiory which will focus on mean of
FDI and hystorical. Secondly the description of metode of foreign direct investment use in
Indonesia and Singapura. Thirdly the comparison of both countries will conclude this essay.

Outline
A.Introduction

A.I mean of FDI

A.II Historical of FDI

B.Metode

B.I method of FDI Indonesia condition

B.II method of FDI Singapore condition

C. Conclution
Comparison the situation foreign direct investment (FDI) in Indonesia and
Singapore

Mean of FDI1

Foreign direct investment (FDI) refers to long term participation by country A into
country B. It usually involves participation in management, joint-venture, transfer of
technology and expertise. (FDI) is a measure of foreign ownership of productive assets, such
as factories, mines and land. Increasing foreign investment can be used as one measure of
growing economic globalization. FDI or Foreign Direct Investment is any form of investment
that earns interest in enterprises which function outside of the domestic territory of the
investor.

FDIs require a business relationship between apparent company and its foreign
subsidiary. Foreign direct business relationships give rise to multinational corporations. For
an investment to be regarded as an FDI, the parent firm needs to have at least 10% of the
ordinary shares of its foreign affiliates. The investing firm may also qualify for an FDI if it
owns voting power in a business enterprise operating in a foreign country. Different
economic factors encourage inward FDIs. These include interest loans, tax breaks, grants,
subsidies, and the removal of restrictions and limitations. Factors detrimental to the growth of
FDIs include necessities of differential performance and limitations related with ownership
patterns. Foreign Direct Investment is guided by different motives. FDIs that are undertaken
to strengthen the existing market structure or explore the opportunities of new markets can be
called 'market-seeking FDIs.' 'Resource-seeking FDIs' are aimed at factors of production
which have more operational efficiency than those available in the home country of the
investor.

Historical of FDI in Indonesia and Singapore

Ever since Indonesia's independence, foreign companies have made major

investments in Indonesia to develop its resources, build infrastructure, establish
manufacturing facilities for export and/or provide products and services for the domestic
market. The intricacies of setting up a company and making an investment in Indonesia are
many. The Indonesian government will have to put a high priority on developing and
upgrading the country's human resources in order to raise their capacity to absorb, assimilate,
modify, and improve the imported technologies, whether transferred through FDI or
purchased through technical licensing agreements with transnational corporations (TNCs).

Wikipedia “foreign direct investment.” Article accesses on 23 October 2010 from

http://en.wikipedia.org/wiki/Foreign_direct_investment
2.economy watch article access on 23 October 2010 http://www.economywatch.com/
 Singapore is an international standard city to work and live in. The globally well
connected, multicultural and cosmopolitan city states offer a conducive environment for
creative and knowledge driven industries. The combination of strong banking secrecy rules,
generous tax incentives and its International reputation for business excellence has attracted
many high net worth individuals and Corporations to Singapore. Singapore is strategically
located at the main crossroads of the world. Along with its excellent reputation, good network
and infrastructure, sophisticated banking system, strong legal framework and attractive tax
system have given Singapore the competitive edge in comparison to other countries.

2
Method of FDI in Indonesia and Singapore condition

The Indonesian government will have to put a high priority on developing and
upgrading the country's human resources in order to raise their capacity to absorb, assimilate,
modify, and improve the imported technologies, whether transferred through FDI It was seen
as a very significant step toward a much more conducive and attractive investment
environment in Indonesia. The regulation:
• Allows 100% FDI investment in selected areas of business
• Limits foreign direct investment to 95%, with a minimum of 5% ownership by an
Indonesian
• Allows FDI investment with certain conditions
• Stipulates the sectors which are closed to FDI investment
Foreign direct investment has made several investment policy adjustment efforts, among
them are as follows:

1. The government has renewed the List of Business Fields Closed for
Investors to be given flexibility in choosing a business investor
(Presidential Decree No. 96 of 2000 jo. No. 118 of 2000). In that decision,
business fields closed to both foreign and domestic investment decreases
of the 16 sectors become 11 sectors. Business sectors that are closed to the ownership
foreign equity sector are reduced from 9 to 8 sectors.

2. Simplifying the process from 42 days to 10 days. Previous PMA approval

conducted by the President, while currently quite done by Echelon I
authorities, in this case and the Deputy Facility Investments

3. Starting January 1, 2001, the government replaces the incentive Liberation

Tax with Investment Tax Allowance of 30% for 6 (six) years.

4. Value investing is not restricted, depending entirely from the project feasibility study
them.

2foreign-investment-in-singapore-63.php.htm
Some of the positive factors which help Singapore in attracting foreign investment are:
• Trust-integrity, quality, reliability, productivity, a strong legal system
• Knowledge-knowledge-based manufacturing and services, a thought and information
hub, commitment to education and skills
• Connected-physical connectivity as well as people and business networks
• Life-an excellent place to live, work and learn
Singapore is a frontrunner in providing services such as International Banking, Trade
Finance, Maritime Finance, Insurance Treasury Operations and Asset and Wealth
Management within the region. It is the fourth largest foreign exchange trading centre in the
world.

International Companies setting up base in Singapore can make use of the diverse capital
markets and state of the art financial services from more than 500 local and foreign
institutions located in Singapore. In addition there are 4500 companies offering professional
services, including audit, accounting and management consulting; market research,
advertising and public relations; human capital services; and legal services.

CONCLUTION

As a developing country, Indonesia needs substantial funds to implement national

development. Needs substantial funds are occurs because of the effort to catch up the
development of developed countries, both regionally and globally region. Indonesia still not
able to provide the development funds. Besides working explore domestic sources of
financing, the government also invited the source foreign financing, one of which is the
Foreign Direct Investment.
When compared with Singapore Indonesia left in the field of attracting foreign
investors so thatIndonesian government must will have to put a high priority on developing
and upgrading the country's human resources in order to raise their capacity to absorb,
assimilate, modify, and improve the imported technologies, whether transferred through FDI.