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Jakarta Post

Finance Ministry's budget cut too much to bear, BKPM chairman says

  • Yunindita Prasidya

    The Jakarta Post

Jakarta   /   Sat, April 25, 2020   /   05:10 am
Finance Ministry's budget cut too much to bear, BKPM chairman says Permit applicants are seen at the Investment Coordinating Board's One-Stop Integrated Service in Jakarta. (JP/Ricky Yudhistira)

The Investment Coordinating Board (BKPM) has asked the Finance Ministry to reconsider a budget cut following the ministry’s plan to reallocate Rp 191.21 billion (about US$12.33 million) from the board’s initial budget to partly finance mitigation efforts to curb the spread of COVID-19.

BKPM head Bahlil Lahadalia said in a virtual hearing with the House of Representatives Commission VI overseeing trade, industry and state-owned enterprises (SOEs) on Thursday that the board would only be able to cut Rp 61.52 billion from its initial 2020 budget of Rp 585.47 billion.

“We have written to the Finance Ministry to request [for the budget] to not be cut by Rp 191 billion, but by Rp 61 billion instead, as it would impact the operations and performance of the BKPM,” Bahlil said in the meeting.

In a recent move to finance the country’s fight against the health crisis, the government revised the 2020 state budget, as stipulated in Presidential Regulation (Perpres) No. 54/2020 on state budget changes. As a result, the BKPM’s budget would be reduced by Rp 133.42 billion, while the Finance Ministry would cut Rp 57.79 billion, bringing its budget to Rp 191 billion.

Bahlil said the ministry’s budget cut plan would be too much to bear because, if implemented, the BKPM’s representative offices in nine countries could be shut down and its representatives could be asked to return home to prevent the investment board from suffering a budget deficit.

He also warned of the coronavirus possibly impacting the inflow of foreign direct investment to Indonesia.

 “The question is: Are we still optimistic that, when COVID-19 ends in June, the realization of investment will still be at the level of Rp 800 [billion]? As long as we are supported with adequate facilities, we are optimistic,” Bahlil said.

Initially, the BKPM said total investment would reach Rp 886 trillion this year, a figure that would be “very difficult to reach in 2020”, Bahlil said. Hence, the BKPM projected that, if the pandemic ended in mid-June, realized investment would hit Rp 855 trillion.

If it ended in July or August, the number would fall far below the initial target to Rp 817 trillion. However, if the crisis continues well until August, the investment coming in “will definitely be below Rp 800 trillion”.

In the first quarter of this year, realized investment reached Rp 210.7 trillion, 23.8 percent of the target, according to the BKPM. Between January and March, investment saw an 8 percent increase from the Rp 195.1 trillion recorded during the same period last year.

The realized investment in Java was almost equal in proportion to investment outside of Java, with investment going into Java accounting for 51.4 percent of total investment and investment elsewhere accounting for 48.6 percent.

Between January and March, 53.5 percent of the investments came from domestic investors and the other 46.5 percent from foreign investors. The BKPM head noted that this was a step in the right direction as it had shown that enthusiasm from domestic investors was on the rise.

In an effort to mitigate the impacts of the pandemic, the BKPM has been speeding up the process of issuing business permits for pharmacies and companies producing medical equipment and companies in other supporting industries.

As of April 21, the BKPM had issued 6,142 commercial or operational permits for those in the healthcare sector, up from the 5,862 it issued throughout March.