Investment in Indonesia Meets 2014 Target, But Outlook Dims This Year


JANUARY 28, 2015

Jakarta. Total investment in Indonesia exceeded the government’s 2014 target, thanks largely to increased foreign direct investment, but the outlook for this year remains dimmed against a gloomy global economy.

Total investment rose to Rp 463.1 trillion ($37 billion), up 16 percent from 2013 and higher than the government’s forecast of Rp 456.6 trillion, according to data from Indonesia’s Investment Coordinating Board (BKPM), which does not include investment in the oil and gas or banking sector.

Foreign direct investment — which accounts for about two thirds of last year’s total investment — rose 14 percent to Rp 307 trillion from Rp 270.4 trillion a year earlier.

Contributions by local companies in 2014 missed the government’s target from the year before. While it reached Rp 156.1 trillion, showing a 22 percent year-on-year increase, the figure was lower than the Rp 159.3 trillion target.

Java remains the favorite destination for investors, accounting for 57 percent of total investment.

BKPM expected investment growth to slow to 12 percent this year, said agency chief Franky Sibarani.

Investment is projected to reach Rp 519.5 trillion, with Rp 175.8 trillion expected to come from domestic businesses.

“We are optimistic but still try to be realistic. Commodity prices keep falling, China’s economy [is slowing down], and Europe’s as well. United States shows some progress, but who knows?” said Azhar Lubis, BKPM deputy chairman for investment monitoring and implementation.

Meanwhile, many investors are still struggling with a range of problematic government policies, particularly those regulating land permits, in their effort to start new businesses or expand their existing companies, Franky said.

“Next, we will start working on de-bottlenecking,” Franky said, referring to the agency’s efforts to streamline the process of issuing permits.

BKPM on Monday launched its one-stop investment licensing service, which pooled the permit application process from 21 ministries and government bodies.

The agency has yet to integrate the procedure for permits issued by provincial or district governments, such as building permits and proof of domicile.

BKPM will focus on assisting investors who failed to expand their business in 2014, especially those involved in the energy, agriculture, maritime, export and import industries, Franky said.

Investment accounts for 31 percent of the economy, the second-largest contributor after domestic spending. The government expects investmebt to help boost economic growth to between 5.6 percent and 5.8 percent this year, compared to an estimated 5.1 percent in 2014.

The announcement on investment, though, failed to impress stock investors who await 2014 financial results of listed companies. The Jakarta Composite Index fell 0.2 percent to 5,268.85, paring Tuesday’s advance.

“The market is still in a wait-and-see state. They are waiting for the full-year financial performance reports for 2014,” said Satrio Utomo, a Universal Broker analyst.

The rupiah stayed relatively unchanged at 12,498 against the US dollar on Wednesday, from 12,493 a day earlier.

The yield on the government’s 10-year bonds fell to 7.1605 percent from 7.2024 percent.

With additional reporting from Reuters