Jakarta. Indonesia could enjoy more foreign direct investment inflows if the government renegotiates the so-called negative investment list, or DNI, and relaxes some restrictions, the World Bank said in a recent report.
The report, "Indonesia Economic Quarterly: Upgraded," published on Thursday (15/06), said a number of DNI restrictions, including foreign equity limits, small and medium enterprises' restrictions and domestic content requirements are a significant deterrent to FDI.
"Reducing such deterrence will improve foreign direct investment and would give a positive outlook to [Indonesia's] economy," World Bank country director for Indonesia Rodrigo Chaves said.
According to the report, FDI inflows to Indonesia have been steadily increasing over the past 15 years, rising from 2 percent of the gross domestic product in 2000 to 3.4 percent in 2015.
The FDI inflows relative to the country's GDP are still lower compared to other countries. The Washington-based lender cited data from the United Nations Conference on Trade and Development (UNCTAD), according to which during the 2013-14 period, the average net FDI inflows, as a share of GDP, were 3.2 percent in Thailand, 3.5 percent in Malaysia and 5.1 percent in Vietnam. That compared to 2.2 percent in Indonesia.
FDI has not only been a key source of capital, it also brings access to new technologies, markets, managerial skills, inputs and products, the report said.
"Inward FDI is negatively correlated with FDI policy regime restrictiveness," the report said. "That is, FDI policy restrictiveness is associated with less FDI."
Among businesses deemed strategic to Indonesia's economy, which remain closed to foreign investors, are several related to medicine and drugs, oil and gas, timber harvesting, sea-fishing and telecommunications.
Separate data from the Investment Coordinating Board (BKPM) said foreign direct investment has so far reached Rp 97 trillion ($7.3 billion) in the first quarter, nearly 1 percent more than in the same period a year earlier. BKPM assumes that $1 equals to Rp 13,300, as stated in the 2017 state budget.
Finance Minister Sri Mulyani Indrawati agreed that investment is one of the important sources of Indonesia's economic growth, so the government is willing to review some of the restrictions.
"We will see what are the quick wins that we can achieve, if it is indeed a potential for our economy," Sri told reporters.
She did not say, however, whether the government will revise its DNI soon.