Investments expected to top Rp 290t

Investments in Indonesia are expected to top Rp 290 trillion (US$32.48 billion), a 20.83 percent rise from Rp 240 trillion officially targeted this year, the Investment Coordinating Board (BKPM) says.

After speaking at the 2011 Investor Summit and Market Expo in Jakarta on Thursday, BKPM chairman Gita Wirjawan said the target could be higher whenever Indonesia got an investment grade, which was expected in the near future.

“We’ll discuss [the target] again. We are struggling for the investment grade first,” he said when asked about a possible investment target revision when Indonesia gets an investment grade by leading credit rating agencies.

An investment grade rating—which indicates a country’s ability to buy back bonds it issued earlier—is expected to pull more foreign funds, especially in the forms of direct investments, flowing into Indonesia.

Earlier this year, top global rating agencies Standard & Poor’s (S&P), Fitch Ratings and Moody’s Investors Service upgraded Indonesia’s credit rating to one notch below investment grade with a positive outlook for a further upgrade in the near future.

Expectations for an investment grade credit rating for Southeast Asia’s largest economy arose when the same rating agencies cut the sovereign debt ratings for developed nations including Japan, the United States and several European countries.

In the first half of this year, Indonesia’s economy grew 6.5 percent with an inflation rate of 4.61 percent, while the ratio of the government debt to gross domestic product (GDP) was 26 percent.

Gita was upbeat that more investment would enter Indonesia in the upcoming months as investors could look to shift their investments to destinations with sound economic conditions.

“In the next months, the turmoil in Europe will continue, but investors will look for redemption and unwinding. As soon as their liquidity improves, they will deploy the capital to the countries with excellent fundamentals and I’m sure Indonesia has them,” he said, adding that the consumer goods sector and infrastructure projects might benefit from the shift of capital inflows.

According to Gita, stellar economic performance coupled with a newly launched tax scheme will make Indonesia more interesting for foreign investors.

In August, the government issued a tax incentive scheme that offers an income tax holiday from between five to 10 years as well as tax allowances to projects in high-priority sectors and in remote areas to accelerate investments in infrastructure and natural resource-based manufacturing industries.

The tax holiday facility will be provided for manufacturing projects in five sectors—base metals, oil refining, petrochemicals, machine tools and renewable energy—with a minimum investment of about Rp 1 trillion.

Tax allowances, which reduce taxable income up to 30 percent of total investments realized over six years, will go to certain labor-intensive projects in remote areas with a minimum investment of Rp 50 billion.

During this year’s first semester, investments reached Rp 115.6 trillion, of which Rp 82.6 trillion was generated from foreign direct investments.

Gita said realization of investment in the third quarter had be “on track” to fulfill the full-year target, but he declined to reveal the figures.

He also said he would try to meet US billionaire Warren Buffet to persuade him to start investing.

“I’ve been offered the chance [to meet Buffet] by an investor friend who knows Warren Buffet personally. I hope to meet him next year.”

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