While many Indonesian businesses remain sceptical about the benefits of a single Asean market, and others feel threatened by the prospect, European businesses operating in the country consider the Asean Economic Community (AEC) a major opportunity for Indonesia.
Economic integration, service liberalisation and regional agreements with key trade partners all give Indonesia opportunities to grow regionally and internationally, according to a survey of 206 senior managers and chief executives of British and European-affiliated businesses in Indonesia.
Forty-one percent of the respondents see the AEC as "the main opportunity for Indonesia" over the next five years, said Adrian Short, chairman of the British Chamber of Commerce Indonesia (BritCham), which conducted the annual survey online from Oct 29 to Nov 12 last year.
As well, 20% of respondents said business opportunities would arise from services liberalisation, 20% cited Asean agreements with key trade partners, and 14% said the main opportunity would arise from the Regional Comprehensive Economic Partnership (RCEP) — the mega-deal being negotiated between Asean and China, Japan, South Korea, India, Australia and New Zealand.
"Simplified customs procedures, harmonised standards and technical regulations as well as enhanced competitiveness and transparency of non-tariff barriers are seen as positive impacts of Asean Economic Community on business," Mr Short said at a recent news conference to announce findings of the chamber's Business Confidence Index (BCI) 2014.
The BCI 2014 survey collected views from corporations operating in various sectors such as automobiles, food and beverage, education, energy, property, agriculture and forestry. It was expanded with the cooperation of the German, French and Netherlands chambers of commerce in Indonesia and with the support of the European Union.
The integrated economic community is seen as a positive development not just for Southeast Asia's largest economy but for the entire region.
"It promises to bring a lot of growth and new opportunities in the region," Nina Hachigian, the US ambassador to Asean, told Asia Focus.
She lauded the progress that has been made so far on the AEC and said that the US fully supported the project.
"It's impressive, I think, the progress that has happened so far," she said. "It's an ambitious project and it shows that Asean is taking on something that is important and we are fully supportive of Asean becoming more unified and stronger. That's all very much in the United States' best interests."
The BCI 2014 survey was conducted just after President Joko "Jokowi" Widodo announced his new cabinet. The respondents were also asked for their views on the new cabinet, doing business in Indonesia, and the ability of the new leadership in the country to carry out economic reform.
Mr Short said 72% of the respondents expressed an overall positive outlook toward doing business in Indonesia, citing strong improvements in macroeconomic factors, particularly in the political environment and investment climate. The results showed a significant bounce back from the previous year's reading of 66%, which reflected uncertainty ahead of the general and presidential elections.
Confidence in the political environment rose to 47% from 42% in the previous survey, while confidence in the investment climate jumped to 60% from 31%, while the overall growth outlook for six out of nine business sectors was positive.
The survey also showed an improved outlook in light of the new government's attitude regarding business and business regulation in Indonesia.
The Asian Development Bank (ADB) also sees a more business-friendly environment taking shape, noting the government's commitment cut to fuel subsidies, improve the investment climate, expand tax collection and accelerate infrastructure development.
"With the extra budget funds resulting from fuel subsidy cuts, the government can now allocate more resources for infrastructure, which are needed to revive and diversify sources of economic growth," ADB president Takehiko Nakao said during a recent visit in Jakarta.
Mr Nakao said the regional lender would give the Indonesian government US$1.5 billion in loans to support the financing of priority infrastructure projects such as roads, electricity, airports and irrigation networks, and especially maritime links by building new ports and acquiring more ships, which is a major focus of President Widodo's administration.
Completing the infrastructure projects, which the ADB estimates will cost more than $500 billion over the next five years, will be critical for the new government to maintain the confidence of business. Seventy-one percent of respondents in the BCI 2014 — up from 60% a year earlier — viewed the lack of infrastructure as a big challenge to doing business in Indonesia.
And while corruption continues to plague the country, the European business community sees it as posing fewer challenges this year, at 62% compared with 74% in the previous year.
The survey also showed that 75% of respondents were anticipating growth in infrastructure and construction while 58% were positive on growth in the agriculture, fisheries and forestry sectors.
BritCham's Mr Short said that one of the challenges in doing business in Indonesia was how to move beyond the capital city: 52% of respondents are not considering expanding beyond Jakarta to other provinces or cities in the country within the next 12 months.
Indonesia's second biggest city Surabaya, the resort island of Bali and resource-rich Kalimantan are listed as the top three areas for expansion, although half of the respondents said they had not had any communications with their respective regional governments. Forty-eight percent expressed doubt that regional governments would be supportive of their business expansion plans.