Discourse: BKPM: Optimize and grow or risk losing momentum

The government has vowed to review existing regulations to improve the investment climate in a bid to achieve a 7 percent economic growth target by 2014, which will require Rp 2,000 trillion worth of investments every year. To dig deeper into the government’s plans, The Jakarta Post’s Andi Haswidi and Rendi A. Witular talked recently with Investment Coordinating Board (BKPM) chairman Gita Wirjawan. Below are the excerpts:


Question: The revision of the so called negative list of foreign investment, as you said, is to be concluded in March. What is to be expected of the new rule?

Answer: The big picture is that Indonesia wants to shift away from its heavy reliance on domestic consumption to focusing more on developing its industrial capacity through making more investments. In a way, our position is contrary to that of China’s, which is currently trying to develop its domestic market. There is a complimentary nature in this. We have to be clever in optimizing this particular momentum, if not, we are going to miss the boat big time.

If we want to achieve impressive investment figures, there are a few things that we must be willing to do. Among those things is the harmonization of existing regulations, including the negative list – not through investment liberalization, but through providing legal certainty.

Let me illustrate what to expect. In the health sector, foreign investment in hospitals is only allowed in Surabaya and in Medan. We have discussed this with the coordinating economic minister and the health minister, and they have agreed that foreign investors can, in the near future, invest up to 67 percent in any hospital in any city.

For the creative industry, what we need is a legal certainty on the limit of foreign ownership. The current rule only specifies that foreigners cannot have a majority ownership, therefore we suggest 49 percent ownership.

The agriculture sector, on the other hand, has to do with strategic commodities that are important for our national security. Foreign investment in key agriculture products that are part of our main staple foods such as rice and corn will be prohibited.


The idea of the complimentary nature of China and Indonesia is intriguing. What does it take to not miss the boat ?

Investments must be accelerated. In the past 15 years we have relied on domestic consumption. China on the other hand, has developed its business capacity at a breakneck speed, it is within their interest to reshape the configuration of their economy through increasing domestic consumption.

We have to simplify regulations such as what we have been doing, developing a one-stop shop for all investment related application procedures, and proposing that the central government give incentives such as tax breaks. China does not need tax breaks now, but they had to have them 20 years ago.

To be fair to the Finance Ministry, we have to actually quantify the data. The ministry is concerned about tax revenue, so we have to show something that will compensate that.


Your job is to sell Indonesia’s investment climate to investors, but most of the variables that determine your success are beyond your control. How do you go about in doing your job?

I am fully aware that my authority is limited, but that does not undermine the role of the BKPM. To launch the one-stop shop investment service we received authorization from 15 ministries, this was just recently concluded after overcoming many obstacles. It took a great deal of communication and ‘jazz’ to be able to complete the project.

Take another example, to realize the Rp 49.4 trillion of investment in East Kutai we had to improvise and ‘break the rules’. The BKPM has not asked for more authority, only for understanding and willingness on behalf of all stakeholders to listen to what needs to be done to boost investment.

Every regional leader has his or her vested interests in maximizing investment flows into his or her province.


Before your role as head of the BKPM, you were once the country director for JP Morgan Indonesia and vice president at Goldman Sachs. With such a background, what do you bring to BKPM?

I bring with me a network in the financial community. And these are agents of good will. They have a good relationship with me.

I also bring practices that are implemented in a multinational company. Such an experience is very valuable. In fact, we are planning to send 10 of our best people to take internships in multinational companies such as Samsung or Coca Cola. So that when they came back, they will have different paradigm on things.