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BKPM sets Rp 886t investment realization target for 2020
The Investment Coordinating Board (BKPM) has set an investment realization target of Rp 886 trillion (US$64
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he Investment Coordinating Board (BKPM) has set an investment realization target of Rp 886 trillion (US$64.9 billion) this year as it seeks to facilitate the completion of stalled investment projects with economic conditions projected to become more favorable.
The target is 9.4 percent higher than the recorded investment realization of Rp 809.6 trillion last year.
“Most of the stalled investment projects are those of energy and electricity companies in addition to the petrochemical and automotive industries,” said Farah Ratnadewi Indriani, the agency’s deputy director for investment climate development, during a press conference in Jakarta on Wednesday.
Farah added that the completion of the stalled investment projects was an integral to reaching the agency’s target this year.
The BKPM exceeded its 2019 investment realization target by 2 percent, recording 12.2 percent growth year-on-year. Realized foreign direct investment totaled Rp 423 trillion, or 52.3 percent of total investment, while domestic investment stood at Rp 386.5 trillion, 47.7 percent of total investment, the agency revealed on Wednesday.
The government has struggled in recent times to attract investment to boost the country’s sluggish economic growth. Indonesia’s GDP grew 5.02 percent in the third quarter last year, the slowest pace in the last two years, amid plunging investment and export growth, Statistics Indonesia (BPS) data showed.
“We are sure that when the omnibus bills are passed into law and we process the stalled investment projects, we can reach this target,” BKPM head Bahlil Lahadalia said during the press conference.
The government is preparing four omnibus bills, including bills on job creation and taxation, to remove regulatory red tape and attract investment.
_________
“Most of the stalled investment projects are those of energy and electricity companies in addition to the petrochemical and automotive industries.”
________
The BKPM, Bahlil added, had overseen the completion of stalled investment projects with a combined value of Rp 189 trillion as of this month, from the total Rp 708 trillion in investment registered by 24 companies.
Among the completed investment projects is a plant construction project of PT Lotte Chemical Indonesia, the local arm of South Korean conglomerate Lotte Chemical, in Cilegon, Banten, worth Rp 61.2 trillion. The project was stalled for four years due to a land dispute.
The government said the land dispute had discouraged foreign companies from investing in Indonesia. According to World Bank presentation materials, 33 Chinese companies relocated their investments to a number of Asian countries between June and August 2019 amid the escalation the of the trade war between China and the United States.
Of the total companies, 23 moved investments to Vietnam, while the remaining 10 moved investments to Cambodia, India, Malaysia, Mexico, Serbia and Thailand. None moved investments to Indonesia.
The BKPM also said on Wednesday that it aimed to attract Rp 246.3 trillion in investment into the country’s upstream industry to boost manufacturing and create jobs. Investments in the upstream industry, which is a labor intensive sector, steadily declined to Rp 216 trillion last year from Rp 335 trillion in 2016.
“We will persuade more businesses to invest in the manufacturing sector to create more jobs,” Bahlil said, adding that the industry’s transition toward automation had also contributed to low workforce absorption last year.
In 2019, realized investment projects created 1 million jobs, compared to 960,000 in 2018 and 1.17 million in 2017, BKPM data show.
Attracting investment has been identified as a priority by President Joko “Jokowi” Widodo’s second term administration. In addition to preparing the omnibus bills, Jokowi has also streamlined licensing processes under the BKPM and granted the body the authority to review regulations deemed unfavorable to investment.
Bahlil said he would simplify more than 20 investment requirements down to 17 to ease foreign and domestic investment processes.
“I am 90 to 100 percent sure that through regulation simplification, Indonesia’s ease of doing business ranking will go up,” he said, referring to the index issued in the World Bank’s annual Doing Business report.
Indonesia ranked 73rd in the World Bank’s Doing Business 2020 report released in October last year. The country’s rank has stagnated since 2018, while neighbors Malaysia and Thailand fare better at 12th and 21st position, respectively.
The World Bank report highlights Indonesia’s rigid regulations regarding employment and minimum wages.
Bahlil said he was prepared to resign if Indonesia did not break into the top 50 in the next four years.
“If I can’t meet that target, I’m ready to step down. That is my moral commitment,” he said.
On Wednesday, the BKPM revealed that Singapore was still Indonesia’s largest foreign investor with $6.5 billion in total investment recorded last year, followed by China ($4.7 billion), Japan ($4.3 billion) and Hong Kong ($2.9 billion).
China’s investment has doubled from $2.4 billion last year.
“China is more aggressive, and they are confident about investing in infrastructure and upstream industries,” Bahlil said.
However, Bahlil said he expected Chinese investment to decline going forward as the East Asian country dealt with the deadly coronavirus outbreak.
“But if the Chinese government can contain the virus within the next two weeks, Indonesia will not see a decline in investment from China in the long run,” he added.
