BKPM head Bahlil Lahadahlia, Jokowi's investment point man. (SP Photo/Joanito De Saojoao)
Investment Board Chief Lists Cases for Optimism After Slight Dent in 2019 FDI
BY :TRIYAN PANGASTUTI
JANUARY 30, 2020
Jakarta. Indonesia saw a slight drop in foreign direct investment in 2019 but breakthroughs in some high-profile investment during the year's last quarter fueled optimism for a recovery in 2020.
The Investment Coordinating Board (BKPM) announced on Wednesday that the country booked a total of $28 billion in foreign direct investment (FDI) last year, down 3.7 percent from $29 billion in 2018.
The board excluded investments in banking and finance and in the oil and gas sectors in its report.
Foreign companies brought in $7 billion in direct investment in the fourth quarter, down 5.4 percent from the same period a year earlier.
President Joko "Jokowi" Widodo made investment his top priority when he was sworn into office for a second term in October.
Jokowi has ordered BKPM head Bahlil Lahadahlia to clear up bureaucratic bottlenecks that have caused hundreds of billions of dollars in FDI commitment to get stuck in local institutions and regional governments.
Bahlil said after three months in the cabinet he had made some progress he could show off to his boss.
"We've taken steps to simplify the process of obtaining an investment permit," Bahlil said.
The former head of the Indonesian Young Entrepreneurs Association (Hipmi) said he had also put an end to a land dispute that bogged down the construction of South Korea's Lotte Chemical's $4.2 billion plant in Banten.
Bahlil has also rolled out the red carpet for Hyundai Motor's request for a fiscal incentive for its car and electric vehicle manufacturing plant.
The BKPM expects FDI will make up 55 percent of Rp 886 trillion ($65 billion) in total investment this year.
Bahlil even said the board "will surpass the target" by repeating its successes with Lotte and Hyundai.
He said the government's plan to replace labyrinthine laws with the so-called "omnibus bills" would definitely boost investment.
President Jokowi has also given him a new target to lift Indonesia's ease of doing business ranking to the world's Top 50 by 2022.
This is a less ambitious target than Jokowi's previously stated goal of reaching at least 40th place in the ranking. Today, Indonesia sits in 73rd place, a long way behind China's 46th.
"I will resign if I can't reach this target four years from now," Bahlil said.
Chinese FDI Making Inroads
Running counter to the overall decline in FDI, Chinese companies have been making more inroads in investment in Indonesia.
FDI from the world's second-largest economy doubled to $4.7 billion last year, turning the country into the second-largest foreign investor in Indonesia after Singapore, which brought in $6.5 billion.
China last year overtook Japan, now in third place with a total investment of $4.3 billion.
"We offer [investment opportunities] to all countries, not just China," Bahlil said. "But [Chinese companies] have indeed been the most aggressive. They do their feasibility study quickly and jump straight into the investment. The Japanese can take three to four years to do the study," Bahlil said.
Bahlil said he was worried the coronavirus outbreak in China would put a dent in Chinese investment this year.
"If the outbreak stops in two weeks, there wouldn't be any problem with the [Chinese] investment," Bahlil said. "[If it does not] new investments would be put on hold, but existing ones will go through. You can't stop a construction project, for example, that's just the nature of the business," he said.
Domestic direct investment, on the other hand, saw a significant increase last year. Local companies put in a total of Rp 386 trillion in investment, up 17 percent from 2018.
That brought total investment – foreign and domestic – to around Rp 810 trillion, slightly above the government's target.
Close to 54 percent of the total investment last year was made in Java. Most of them went into utilities, warehousing, transport, communication and base metals.
Bahlil said the trend for investment outside Java is encouraging, having jumped 22 percent in the fourth quarter alone last year.