Indonesia's Haphazard Rules Turn Foreign Investors Away: BKPM Chief


FEBRUARY 02, 2018

Jakarta. The chief of Indonesia's investment board, known as the BKPM, said on Friday (02/01) frequent and abrupt changes in regulations were discouraging foreign investors from putting money into Southeast Asia's biggest economy.

Earlier this week, Thomas Lembong warned that Indonesia is "still losing out" to neighbors such as the Philippines, Vietnam and Thailand.

Lembong, head of the Investment Coordinating Board, told reporters on Friday it is common knowledge that "sudden and constant changes in regulations create instability that is hard for any investor who's willing to take a risk with their capital."

"Thailand, Vietnam, Malaysia have more stable regulations," he said.

Foreign investors have applauded some efforts by the government to streamline regulations, but say there are still too many restrictive regulations and a stifling bureaucracy.

Indonesia's economy has been growing at about 5 percent annually in recent years, but policymakers have been frustrated by an inability to speed up the pace, partly due to sluggish consumption and tepid investment.

Last year, Indonesia recorded 8.5 percent more foreign direct investment (FDI) in rupiah terms than it attracted in 2016.

For 2017, FDI in sectors excluding banking and oil and gas was 430.5 trillion rupiah ($32 billion). For 2016, it reported an 8.4 percent increase in rupiah terms.

Indonesia has sought to scale back a so-called "negative investment list" that restricts or caps sectors open to foreign investors. In February 2016, President Joko "Jokowi" Widodo's administration opened up sectors ranging from e-commerce and telecommunication equipment in a move dubbed "Big Bang."

But Widodo's pledge to revise the list further is yet to materialise.

The revision "is in process. The president has instructed us to evaluate this but let's abide by the existing one for now," Trade Minister Enggartiasto Lukita said on Friday.

On Wednesday, Jokowi warned that Indonesia was losing out to neighbors in export markets.

"This big country of Indonesia is inferior to Thailand in terms of exports. With enormous resources and human resources, we are losing. There is something wrong and something has to be changed," state news agency Antara quoted him as saying in a speech at the Trade Ministry.

Lukita said overcomplicated regulations and red tape were also obstructing foreign trade agreements. Indonesia had only reached one free trade deal in the past eight years, with Chile, he said.