While Indonesian President Yudhoyono has implemented reforms to improve the efficacy of the business environment, the report points out that administrative weaknesses, excessive bureaucracy and trade barriers continue to inhibit the competitiveness of the Indonesian economy, finds a report produced by Maplecroft.
According to the report, one of Indonesia’s biggest constraints in attracting investment is the state of its infrastructure.
The geographical complexity of the Indonesian archipelago makes provision of efficient transport infrastructure challenging. Furthermore, the trend of rising resource nationalism is set to continue, with the mining and agriculture sectors likely to be particularly affected.
Dismantling of the Jemaah Islamiyah terrorist group has considerably lowered the risk of terrorism in Indonesia. However, there is still a worryingly high level of indoctrination of young Muslim youth in radical Islamist ideology in various hard-line mosques and madrassas (Islamic seminaries) across the country.
"Over the long term, companies should be aware that the radicalisation of the Muslim youth is likely to result in the formation of small, autonomous terrorist groups that could stage small-scale bombings against Western targets," notes the report.