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Firm policies will bring in more investors: BKPM

The incoming administration needs to immediately address several short term goals in its efforts to bring in more investors and improve its competitiveness in Southeast Asia, according to the Investment Coordinating Board (BKPM)

Tama Salim (The Jakarta Post)
Jakarta
Fri, October 10, 2014

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Firm policies will bring  in more investors: BKPM

T

he incoming administration needs to immediately address several short term goals in its efforts to bring in more investors and improve its competitiveness in Southeast Asia, according to the Investment Coordinating Board (BKPM).

BKPM chairman Mahendra Siregar said the incoming administration, whose leaders Joko '€œJokowi'€ Widodo and Jusuf Kalla will be sworn in on Oct. 20, needs to address the country'€™s most pertinent issues in order to sustain its attractive investment climate.

'€œI think they [investors] are looking for good and firm policies with regard to [strengthening] the fundamentals of the Indonesian economy,'€ Mahendra said on the sidelines of the Trade and Investment Forum at the JIExpo compound in Central Jakarta, on Thursday.

Mahendra said there were three issues that needed immediate handling: the ballooning fuel subsidies, the next concrete plans for infrastructure investment and the improvement of front-line industrial relations.

If the next administration came up with the correct policy on fuel subsidies, he said, it would address the structural problems of the trade account, as well as the state budget deficit.

The country currently depends on imports for almost 60 percent of its oil needs and oil imports have become the main cause of the ballooning current account deficit. The government spends around Rp 874 billion (US$71.77 million) per day for oil imports, according to the National Energy Council.

President-elect Jokowi promised during his election campaign that he would abolish fuel subsidies within four years.

Mahendra said infrastructure investment would help improve logistics and connectivity, which in turn would result in improved competitiveness.

According to data from the investment board, Indonesia has improved its ranking on the 2014 Global Competitive Index, moving up four spots to number 34 of 148 countries, mainly supported by improvements in infrastructure and connectivity.

In spite of the upturn, Indonesia remains less competitive than its regional neighbors, Malaysia and Thailand, which ranked 20 and 31 on the index, respectively.

Moreover, Mahendra said Jokowi needed also to '€œimprove the condition of industrial relations and productivity with regard to Indonesian workers'€.

'€œIf these three programs are clear in the new government'€™s agenda, I think, not only can we sustain the interest and the attractiveness of investors to Indonesia, but even strengthen and accelerate investments going forward,'€ he added.

To this end, he forecast a 15 percent growth in investments for the country next year, setting up a gross annual target of US$42.7 billion.

  • Jokowi'€˜s administration needs to improve the investment climate
  • Investors are awaiting for good, firm policies
  • Jokowi needs to handle the ballooning fuel subsidy

'€œThe 5.5 percent economic growth year in, year out, is equal to a minimum 15 percent investment growth, but if that could also be made stronger by improvements in infrastructure investment, then it can easily become closer to 20 percent,'€ Mahendra added.

The failure to address these three issues would prove catastrophic for the country, Mahendra said. '€œ[...] even the structural problems can erode the Indonesian economic fundamentals and we could even
lose momentum in the next five years, let alone in the long term,'€ he concluded.

Earlier during the Trade and Investment Forum, Trade Minister Muhammad Lutfi attributed the growth of the young middle class as the main attraction for many foreign investors eyeing opportunities in the country.

Lutfi said that the country'€™s trade policies aimed to leverage the 150 million-strong middle class in order to push for regional integration and expand the role of upstream industries. '€œThe next trend is world and regional integration, [and] going up the value chain,'€ he said.

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