T

he new government under President Joko '€œJokowi'€ Widodo has set an ambitious target to increase realized investments by twofold within five years, buoyed by optimism that the cut in bureaucratic red tape will draw stronger inflows of foreign direct investment (FDI).

Annual realized investments are targeted to hit Rp 933 trillion (US$76.5 billion) by the end of 2019, or double this year'€™s estimated figure of Rp 456.6 trillion, the Investment Coordinating Board (BKPM) has revealed.

FDI would account for 61 percent of the realized investment target, with the rest coming from local investors in the form of domestic direct investment (DDI).

To achieve the five-year target, the new government would cut bureaucratic red tape and reduce the processing time for business permits, said Farah Ratnadewi Indriani, BKPM'€™s deputy chairman for investment climate development.

'€œPak Jokowi has mentioned that investors would only need one place to process their investments, the same place from beginning to end,'€ Farah told foreign investors in a seminar in Jakarta on Wednesday.

She added that the government was committed to enforcing the so-called '€œone-stop service'€ at provincial level, with Jokowi and the Coordinating Economic Affairs Ministry planning to work hand-in-hand with regional leaders.

Overlapping bureaucracy at regional and central levels has led the World Bank to rank Indonesia 114 out of 189 countries, based on an assessment of ease of doing business in its Doing Business 2015 report.

The bank ranked Indonesia 155 in terms of starting a business and 153 in terms of dealing with construction permits. On average, starting a business in Indonesia requires 10 procedures, takes 52.5 days and requires paid-in minimum capital of 35.5 percent of income per capita, according to the World Bank.

In the energy sector, it could take up to six years to process business permits for large-scale investments, like a power plant, Jokowi said to bankers and industry representatives at the annual Bankers'€™ Dinner held by Bank Indonesia (BI) last week, quoting his conversation with various investors.

'€œA lot of scrutiny [among foreign investors] will be on the energy sector, as structural reforms are badly needed here,'€ said Gundy Cahyadi, an economist with DBS Bank in Singapore.

'€œUnlike road building or the maritime revolution, the problems in the energy sector are often associated with inefficient bureaucracy and rent-seeking behavior more than anything else,'€ he stated.

Suryo Bambang Sulisto, the chairman of the Indonesian Chamber of Commerce and Industry (Kadin), said that there were '€œridiculous'€ policies implemented by the previous government that acted as deterrents for local and foreign investors to enlarge their investments in Indonesia.

'€œIf it is perceived that Indonesia is anti-foreign investment or anti-foreign companies dominating certain sectors, yes this is the issue that we need to address,'€ he said on Wednesday.

'€œIn short, we need smart people, smart investment, smart public policies,'€ the Kadin chairman stated.

Indonesia maintained strong FDI growth in the third quarter of this year as investors remained upbeat about the country'€™s long-term outlook.

According to BKPM'€™s data, total FDI realization in the third quarter grew 16.9 percent year-on-year to reach Rp 78.3 trillion. Meanwhile, domestic direct investment (DDI) grew 24.2 percent to hit Rp 41.6 trillion. The combination of FDI and DDI took total realized investments from July to September to Rp 119.9 trillion, the highest level ever recorded.