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Jakarta Post

West Java's economy going strong but must keep eye on inflation, governor warns

  • Arya Dipa

    The Jakarta Post

Bandung   /   Tue, February 11, 2020   /   04:09 pm
West Java's economy going strong but must keep eye on inflation, governor warns West Java Governor Ridwan Kamil (right) discusses with Tokopedia's CEO, William Tanuwijaya and his team after signing a memorandum of understanding related to the development of digital villages via the Tokopedia Center ecosystem and the Digitalization of Public Services in Genug Pakuan, Bandung, Tuesday (8/20). The Tokopedia application is currently visited by up to 90 million people every month with transactions reaching Rp18 trillion each month or reaching one percent of the Indonesian economy. (JP/Arya Dipa)

While West Java has recorded the highest rates of domestic and foreign investment in the country over the last two years, with economic growth also above the national average, the governor has admitted his administration needs to monitor the province's above average inflation rate.

“[Inflation] remains a concern,” West Java Governor Ridwan Kamil said during the inauguration of the new head of Bank Indonesia’s [BI] West Java branch on Friday.

Statistics Indonesia (BPS) reported that inflation in West Java reached 2.95 percent in the period of January to August last year, up from 2.58 percent year-on-year (yoy), mainly driven by rising food prices in the region. The rate is higher than the 2019 national average of 2.72 percent.

Many believe the high inflation rate could scare off investors, as inflation erodes the value of investment returns over time, prompting investors to shift their money to markets with lower inflation rates.

During the inauguration ceremony, Ridwan called on BI’s West Java chief representative, Herawanto, to help strengthen the economy of West Java.

“The West Java administration needs to translate BI’s statistical language into concrete programs to strengthen its economy,” said Ridwan.

Read also: West, Central Java lead efforts to lure investors

Separately, BI senior deputy governor Destry Damayanti responded to Ridwan’s statement, saying it was one of BI’s duties to help regional administrations.

“Our mandates include maintaining price stabilization. Together with the West Java administration, we already have a regional inflation monitoring team. We will keep inflation on both national and regional levels relatively low,” said Destry.

The West Java administration has set a target to increase investment in the province by 10 percent in 2020 from the Rp 130 trillion (US$9.5 billion) pocketed last year.

Amazon and Hyundai are among the foreign investors expected to pour money into West Java, with investments of Rp 40 trillion and Rp 100 trillion, respectively. The petrochemical business in Indramayu is also expected to receive Rp 1 trillion in foreign investment.

Ridwan said West Java’s large population allowed it to achieve high economic productivity, noting that drivers of the province’s economy included tourism and manufacturing. (syk)