Today | 6.6.2015
Indonesia not renewing 2005 bilateral agreement
SINGAPORE — Indonesia has informed Singapore that it does not want to continue with a bilateral agreement signed in 2005 by both countries to promote greater investment flows, and this is an issue that must be addressed for both nations to boost economic ties, said Prime Minister Lee Hsien Loong.
In a wide-ranging interview with regional journalists yesterday (June 4), Mr Lee said that while Indonesia had the sovereign right to renegotiate the Agreement on Promotion and Protection of Investments, it is important to bear in mind that the agreement is important for investors, as it sets out the legal framework on norms and protection.
Mr Lee was responding to a question from Kompas TV news editor Yophiandi Kurniawan on economic ties between Indonesia and Singapore as well as discussions between Indonesian President Joko “Jokowi” Widodo and Mr Lee on Singapore’s investments into the largest economy in South-east Asia.
“We have very intimate relations ... economically, but also on political relationship and security cooperation,” said Mr Lee, adding that Singapore is one of Indonesia’s biggest investors.
He noted that Mr Widodo was keen to increase investments from Singapore and for both countries to work more closely together.
“I am happy to do that. But I think that there are also issues which we have to deal with when it comes to economic cooperation,” said Mr Lee, referring to the bilateral investment treaty commonly known as an investment guarantee agreement (IGA).
IGAs provide a legal framework that clearly sets out investment norms and protection when investing in another country.
Provisions typically include the principle of fair and equitable treatment and investor-state dispute settlement mechanism.
The Singapore-Indonesia IGA is due to expire on June 20 next year. Jakarta has indicated that it will not renew the agreement and is looking at renegotiating a new one.
“When investors go into a country, they are looking for reassurance and confidence that the framework will be there, and the better an IGA you have, the easier it will be to persuade investors to come in,” said Mr Lee.
“So I think these are factors which investors will look at when they decide whether they want to invest in Indonesia ... we hope that we will be able to make progress and both sides will understand how to create the conditions for this.”
Responding to TODAY’s queries, a Ministry of Trade and Industry spokesman said Singaporean investments made in Indonesia before June 20 next year will continue to be covered by the IGA for a further 10 years, until June 20, 2026.
In addition, Singaporean investments will remain covered by the ASEAN Comprehensive Investment Agreement, as well as other ASEAN investment agreements and comprehensive free-trade agreements.
“We understand that Indonesia has conducted similar reviews of its bilateral investment agreements with other countries. Singapore’s economic relations with Indonesia remain deep and multifaceted. Going forward, we will continue to look for ways to enhance bilateral economic cooperation between our two countries,” added the spokesman.
According to the Malaysian Ministry of International Trade and Industry website, Jakarta had notified Kuala Lumpur on June 20 last year that it would not renew the IGA between the two countries, and that termination of the agreement would take effect from June 20 this year.
Mr Kurniawan also asked Mr Lee for update on the extradition treaty between Singapore and Indonesia.
The Prime Minister replied that he had not discussed it with Mr Widodo, adding that the agreement was signed as a package that included a defence cooperation agreement and that it was pending ratification by the Indonesian Parliament.
“We had negotiated the package as one and we were prepared to implement it, but Indonesia, I think, there were second thoughts somewhere in the political system, so it’s been held up (from) 2007 till now. It’s been eight years,” said Mr Lee.