As of September, overall realized investment reached Rp 601.3 trillion (US$42.89 billion), a 12.3 percent increase from the equivalent period of last year, the BKPM announced on Thursday. Domestic investment grew 17.3 percent to Rp 283.5 trillion, while foreign direct investment (FDI) rose 8.2 percent yoy to Rp 317.8 trillion.

The gap between foreign and domestic investment in the same nine-month period may seem narrow at Rp 34.3 trillion, but historically, looking at 2014 to 2016 annual data, the discrepancy between the two sources of investment has been wide, reaching between Rp 140 trillion and Rp 190 trillion per year, BKPM data shows.

“We still expect FDI to remain big, but I have a vision that domestic investment must be stronger and much greater than FDI,” Bahlil, former chairman of the Association of Young Indonesian Businesspeople (HIPMI), told reporters on Thursday.

Bahlil plans to prioritize improving the ease of doing business and the investment climate in Indonesia, which he said had been hampered primarily by overlapping regulations and bureaucratic red tape in securing investment permits.

“We will make everything clear at least by December, so in January, we can start” to relieve the bottleneck, he said, adding that the BKPM would prepare a special taskforce to assist every single investor and ease their onboarding process.

Bank Central Asia (BCA) chief economist David Sumual said that while Bahlil’s vision of pushing domestic investment is a positive thing, the new BKPM chief needed to be mindful that FDI played a huge role in keeping Indonesia’s economy stable amid pressures on the current account deficit (CAD).

“Right now we are facing pressure on our CAD and to narrow the deficit, we are still relying on the [foreign investment] portfolio. FDI is still very important for Indonesia right now,” David told The Jakarta Post, adding that if Indonesia aspired to push its economic growth to above 5.5 percent, the country must have a larger FDI portfolio of at least Rp 1 quadrillion per year.

Instead of focusing on domestic versus foreign direct investment, David advised the government to focus on improving ease of doing business and the investment climate, which remains uncompetitive even though the government had adopted the online single submission (OSS) system to simplify permit issuances. The OSS’ implementation has been criticized by industry players for adding yet more steps to bureaucracy.

Indonesia’s ranking in the World Bank’s Ease of Doing Business (EODB) index has remained stagnant at 73rd position in the 2020 edition, despite efforts to attract investment by removing unfriendly regulations. President Joko “Jokowi” Widodo wants Indonesia to be ranked 40th next year.

Samuel Sekuritas economist Lana Soelistianingsih shared David’s view, adding that either domestic or foreign domestic investment would not matter so long as the investment can create jobs and contribute to Indonesia’s economic growth, which reached a two-year low of 5.05 percent in the second quarter of this year.

“Perhaps what Pak Bahlil is trying to say is that domestic investment is good because profit dividends will be channeled within Indonesia, while for FDI, the profit will be funneled overseas, which can burden our current account,” Lana told the Post.

"The problem with domestic investment is financing. Many domestic investors face limited financing as our domestic financing is not big enough to support the investments. Sometimes, even domestic investors get financing from overseas.”

Investment is a top priority for Jokowi to jack up Indonesia’s economic growth as trade weakens amid the ongoing trade war-driven global economic slowdown.

Investment realization from January to September represents 75.9 percent of the BKPM’s overall target this year to net Rp 792 trillion in realized investments from both domestic and foreign investors.

In terms of the origin of FDI so far this year until September, Singapore tops the list with a 25 percent share, or $5.4 billion in investment, followed by China and Japan with $3.3 billion (15.6 percent) and $3.2 billion (15.1 percent), respectively. The Netherlands and Hong Kong were the fourth- and fifth-biggest foreign investors in Indonesia.

“The most interesting thing is if we look at investment distribution, it is spread evenly and doesn't only focus on Java Island. This means that investment prospects outside Java are beginning to be more promising as a result of the infrastructure development that has been pursued in the last few years,” Bahlil said.

In the January-September period, investment outside Java accounted for 45.1 percent of the overall investment value.

Looking at the business sectors, 18.5 percent of the overall realized investment in the first nine months of this year went to transportation, warehouse and telecommunications, followed by 16 percent to electricity, gas and water, 8 percent to construction, 7.9 percent to housing, industrial zones and offices and 7.4 percent to mining.

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