Ria Fortuna Wijaya, Jakarta – Regulatory unpredictability and poor coordination between government ministries remain the biggest challenges facing European investors in Indonesia, even as Jakarta and Brussels prepare to implement their long-awaited comprehensive economic partnership agreement, European Union Ambassador to Indonesia and Brunei Darussalam Denis Chaibi said.
European companies are accustomed to operating under extensive regulations and are willing to adapt to Indonesian rules, Chaibi said. The problem, however, arises when the rules or their implementation keep changing.
"EU businesses will adapt to the rules. We have lots of rules in Europe, so they know how to adapt to rules," Chaibi said in an interview with Jakarta Globe on Monday.
"But what is very costly for them is to adapt to rules every three months or every month."
Chaibi said frequent changes in the implementation of policies, including local content requirements, import and export licensing, and foreign exchange deposit rules, could discourage investment by raising compliance costs and making it harder for companies to plan ahead.
"Every time there is a new initiative, which totally makes sense for policy purposes for Indonesia, it may sometimes hinder EU investments here," he said.
Predictability, rather than the absence of regulations, is what European businesses are looking for, according to Chaibi.
For European investors, predictability does not necessarily mean fewer regulations. Rather, it means having a stable and clear policy framework that allows companies to understand compliance requirements and make long-term investment decisions without repeatedly adjusting to changes in rules or their implementation.
The issue is particularly relevant as Indonesia and the EU move closer to implementing the Indonesia-European Union Comprehensive Economic Partnership Agreement, or IEU-CEPA, which Chaibi said could take effect in early 2027.
The agreement is expected to deepen trade and investment ties between the two economies, but Chaibi said businesses should already be preparing for its implementation.
European investors have identified Indonesia's regulatory environment as one of the main factors shaping their investment decisions, he said, while security is not seen as a major concern.
"The impression of any visitor to Indonesia is that the people are very kind, and that the country is very strong and stable," Chaibi said.
"So, security is not a concern, especially compared to predictability and coordination."
The EU is Indonesia's fourth-largest trading partner, accounting for about 6% of the country's total trade in 2025. Bilateral goods trade reached Euro 28.9 billion ($33.71 billion) that year, with EU imports from Indonesia amounting to Euro 18.7 billion and exports to Indonesia totaling Euro 10.2 billion. The two sides also recorded Euro 9.3 billion in services trade in 2024.