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Govt confident of double-digit foreign investment growth
The government is still confident of achieving a double-digit growth in foreign investment this year despite continuing uncertainties in the global economy that have scared multinational companies away from expanding their business
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span>The government is still confident of achieving a double-digit growth in foreign investment this year despite continuing uncertainties in the global economy that have scared multinational companies away from expanding their business.
Investment Coordinating Board (BKPM) head Thomas Lembong said investors, particularly foreign ones, still perceived Indonesia to be a country with a stable investment climate as many other nations around the world had been disrupted economically.
He said the perspective of stability surfaced following Indonesia’s success in holding a presidential election in April and in curbing the unrest that arose afterward.
“My prediction is that the full-year figure for investments will reach a double-digit growth, both in foreign and domestic investments,” Thomas told reporters on the sidelines of an event on Tuesday. “We should keep foreign investments as a positive aspect to the economy because the growth of our consumption and exports is becoming soft.”
He also mentioned that an international rating agency, Standard and Poor’s (S&P), upgraded its sovereign rating for Indonesia to BBB in May, at the same time as the agency downgraded ratings for many other countries, thus fueling more confidence from investors.
With the rating upgrade, S&P, along with other rating agencies, Moody’s and Fitch, have therefore determined Indonesia to be an investment-friendly country.
The BKPM’s optimism has been showing since foreign investment improved in the first quarter of 2019. Even though it slumped by 0.9 percent year-on-year (yoy) to Rp 107.9 trillion (US$7.5 billion), it was far better than in the same period in 2018 when the figure dropped by 11.6 percent yoy.
The escalation of a trade war between the United States and China, Thomas said, had only affected the stock market, whereas foreign direct investments (FDI) had actually improved.
“Every quarter, I always see [foreign investors] expanding their manufacturing plants in Indonesia to escape the impact of the trade war. Factory owners who have plants in China and Southeast Asian countries, for instance, would rather expand their production in the latter ones, including Indonesia,” said Thomas.
Speaking on a different occasion, Industry Minister Airlangga Hartarto confirmed Thomas’ statement, saying that two electronics companies, the Sharp Corporation and LG Electronics, plan to relocate their factories from Thailand and Vietnam, respectively, to Indonesia as part of their investment consolidation plans in Southeast Asia.
Sharp would relocate its twin-tub washing machine facilities from Thailand to its Indonesian production base in the Karawang International Industrial City (KIIC), while LG is to relocate its air-conditioner factory from Vietnam to its production facility in Legok, Tangerang, Banten.
“Some of the reasons for their expansions in Indonesia are that they already have [manufacturing] experiences here and because they are seeing Indonesia as a stable place,” Airlangga said in a recent statement.
Before Sharp and LG, other companies that officials said have decided to relocate or expand their production bases in Indonesia include Pegatron, a China-based assembler of Apple iPhones, Korean automaker Hyundai and US footwear giant Nike.
In order to further improve the ease of doing business in the country, Thomas has promised that the BKPM would perfect its Online Single Submission (OSS) system, which the government launched last year to digitize the nationwide business licensing process.
“My prediction is that [all problems] concerning the OSS system would be dealt with in the next six months, so there should be no more reason for people to blame the OSS for being a barrier to investing in Indonesia,”
he added.
Thomas also encouraged policymakers to realize earlier ideas from both the winning coalition and the opposition side of the presidential election that could be useful in advancing the economy so the administration could prove it can accommodate ideas from any side.
