T

he appointment of Mahendra Siregar, currently deputy finance minister, as the new chief of the Investment Coordinating Board (BKPM) replacing Chatib Basri, currently the finance minister, was welcomed for what analysts call the advantages built up during his longtime career as a bureaucrat, technocrat and diplomat.

But Siregar is well-advised to realize he is taking over the BKPM at a very difficult time when the combination of the external factor of the lingering Federal Reserve'€™s monetary tightening policy and internal factors from within Indonesia have dampened foreign investor interest in the country, let alone the political noise in the 2014 election year.

Yet his toughest uphill challenge is that most of the biggest barriers to domestic and foreign investment such as an acute lack of basic infrastructure, bureaucratic red tape, legal uncertainty and licensing logjam at regional administrations, lie completely outside of his jurisdiction as BKPM chairman.

 Therefore, the most delicate task ahead for him is influencing the Cabinet to realize the importance of maintaining policy consistency and predictability as one of the keys to attract direct investment. While Indonesia has over the past three years become a darling for investors, many things have gone wrong for our economy over the past three months.

External factors, notably the looming monetary tightening by the Fed and Indonesia'€™s ballooning current account deficit, combined to set off massive capital outflows, pushing down the rupiah exchange rate and equity prices over the past three months. But the current '€œmini'€ economic crisis could also be a blessing in disguise for Siregar to campaign for reform measures because, as his predecessor Basri has often pointed out, '€œbad times make good policy'€.

As Thomas Olsen of the Bain & Company management consulting firm also noted here earlier last week, difficult macroeconomic conditions would benefit Indonesia because they would exact more discipline on the government and all the policymakers to accelerate reforms to woo back investment. Hence, the new investment chief should strike while the iron is still hot, waking up the other economics ministers to the urgent need for a faster pace of reform to improve the economic outlook.

The economic ministers and most politicians, after having seen the severe hit that the economy has taken as a result of the recent capital outflows, should now have open ears to the new policies needed to woo back foreign capital.

As part of Siregar'€™s priority programs, he will also need to educate regional leaders (governors, regents and mayors) on the vital importance of investment to create jobs, which in turn generates wages and purchasing power to buy goods and services to wheel the economy.

Siregar should convince regional leaders that economic growth is the best freeway to get elected and reelected. But growth cannot occur without investment. Therefore, a conducive investment climate should be created through business-friendly local regulations.

But this is no easy task as the majority of regional administrations are still rejoicing in euphoria over the power they now hold after the launch of regional autonomy in 2001.