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Investment opportunities and challenges in priority sectors
Long-term investment projects are crucial in Indonesia's economic growth and cover key sectors such as infrastructure, energy, agriculture and tourism.
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Surfers carry their board past chairs and umbrellas along Kuta Beach near Denpasar, Bali, on March 14, 2023. (AFP/Sonny Tumbelaka)
T
he current conditions and prospects of investment in Indonesia is a topic that continues to be interesting. Investment is a crucial factor supporting economic growth and vital to sustainable development. With a large population and stable economic growth amid high global uncertainty, Indonesia can attract the interest of domestic and foreign investors to invest in various economic sectors. This investment can help create jobs, increase per capita income and expand economic opportunities for the community.
Along with global economic developments, Indonesia strives to increase its investment competitiveness through various policies and initiatives. The Indonesian government has implemented various fiscal and non-fiscal incentives to encourage investment, including simplifying regulations, improving infrastructure and improving the investment climate. Apart from that, Indonesia is also aggressively promoting investment in various countries through participation in international forums and holding various investment promotion events.
In 2023, the Investment Ministry/Investment Coordinating Board (BKPM) recorded that investment realization throughout 2023 reached Rp 1.41 quadrillion (US$89.59 billion). This achievement exceeded the target (101.3 percent) previously set at Rp 1.4 quadrillion with total employment of 1,823,543 people. Realized investment in 2023 consisted of realized foreign direct investment (FDI) amounting to Rp 744 trillion, equivalent to 52.4 percent of total investment realization, and realized domestic investment (DDI) amounting to Rp 674.9 trillion or reaching 47.6 percent. The realization of this investment grew by 17.5 percent year-on-year (yoy) compared with the 2022 achievement, which only reached Rp 1.2 quadrillion. Investment realization throughout 2023 spread across five main sectors: the basic metal industry, metal goods, non-machinery and equipment; transportation, warehouse and telecommunications; mining; housing, industrial and office areas and the chemical and pharmaceutical industries. Apart from accelerating investment projects that are already underway, to promote investment in support of the development of the the new capital city Nusantara, the Investment Ministry/BKPM is holding the launch of 12 Investment Opportunity Map (PPI) projects in 2023. The total value of the investment from the 12 projects offered is Rp 52.17 trillion.
Investment in 2024 is targeted to be higher at Rp 1.6 quadrillion. In line with developments and needs, Indonesian investment is not limited to traditional sectors such as agriculture, mining and manufacturing. Still, it is also increasingly expanding into innovative sectors such as information technology, renewable energy and start-ups. Indonesia has great potential to become an attractive investment destination for investors looking for long-term growth opportunities.
Priority sectors in investment in Indonesia
Long-term investment projects are crucial in Indonesia's economic growth and cover key sectors such as infrastructure, energy, agriculture and tourism. There are projects in priority investment sectors in Indonesia, such as the infrastructure sector, including the construction of roads, airports, ports and other transportation networks, which aim to increase connectivity and mobility within the country.
Apart from that, the energy sector also has very high investment potential. As a developing country with a large population, energy demand continues to increase along with economic growth and urbanization. Investment in the energy sector, especially in renewable energy and energy efficiency, is crucial to ensure a sustainable and environmentally friendly supply. Apart from that, this sector also broadly impacts infrastructure development and other industries. The government states that Indonesia currently has a new renewable energy (EBT) potential of 3,600 gigawatts and is also building a Green Industrial Park covering an area of 30 thousand hectares. With abundant natural resources, Indonesia has great potential to develop renewable energy sources such as geothermal and solar energy.
