Head of Indonesia's Investment Coordinating Board Thomas Lembong and Minister of Industry Airlangga Hartarto Optimist on 2019' Investment Realization - Photo by BKPM

JAKARTA (TheInsiderStories) – The disappointing realization of investment in 2018 doesn’t make Indonesian government pessimistic for 2019’ targets. This year, Indonesia expects to accelerate the slowdown that hit during 2018.

Investment Coordinating Board targeted Rp792 trillion (US$56.57 billion) investment realization in 2019, or hiked by 9.8 percent compared to a year ago Rp721.3 trillion. The target has covered 55 percent of foreign investment and 45 percent of domestic investment.

The growth is quite aggressive, doubled than last year, but lower than the year before 2018. But, the chairman, Thomas Lembong optimistic to reached the targets. He said, the Government will do some hard works like policy easing for reaching target, amid the expectations of better economic growth and lower tense of global economy.

As an example, he said, in the last quarter of 2018, there were economy turbulences with currency fluctuation and trade war but the investment realization still grow. With a better outlook on Indonesia’ economy after the general election and various policies, Lembong declared an optimism in facing 2019.

Seeing the board’ dialogues with big investment applicants, he added, there are some signals that foreign investment will be rebound. Global economic storm has passed away. And in terms of domestic factor, government’s pragmatic and reformist policies will attract foreign investors.

Moreover, he continues, Indonesia sets an aggressive target to reach 40th rank in the World Bank’s Ease of Doing Bussiness (EoDB) this year. Not sure if it’s realistic or unrealistic, but Indonesia was on 72nd rank right now, dropped one rank from the previous year.

Indonesia’s recent rank is still left behind from the neighbor countries such as Singapore, Malaysia, Thailand, and Vietnam. To realizing the dream, government will release some policies to attract Indonesia’ investment climate, as World Bank will start the survey in April and May.

The Online Single Submission, according to Government  will be optimized and regulation will be synchronized. Lembong not deny that there are some overlapping regulations that cause constraints, especially in the central and local government. Moreover, the recent regulation is also considered SME-unfriendly.

Industry Minister Airlangga Hartarto also shared his optimism over increasing investments in the manufacturing sector in 2019, as some international industries have expressed their commitment to invest in the country. He showed, Indonesia’ International Investment Position (IIP) was relatively stable in the third quarter of 2018.

The country’ IIP at the end of the third quarter of 2018 recorded a net liability of $297.0 billion, or 28.5 percent of the gross domestic product, relatively unchanged from that at the end of the previous quarter, according to Bank Indonesia. Investors’ confidence also shown that Indonesia is still considered a potential country for manufacturing and production for both the domestic and export markets.

World Bank

Followed, the global trend, World Bank estimated Indonesia’ economic growth around 5.2 percent in 2018 and 2019, or slightly higher than 2017 at 5.07 percent. It said, the momentum of investment is expected to continue to rise in 2019 to support the growth.

Frederico Gil Sanders World Bank‘s Lead Country Economist for Indonesia rated, the stronger domestic demand, still led by investment and is expected to outweigh the drag from the external sector, amid slower global growth and continued global trade policy uncertainty.

He stated, investment growth remained a key driver of the economy, with construction investments rebounding from the previous quarter. While private consumption eased slightly, a surge in government consumption kept total consumption growth on an even keel, said Sanders.

Going forward, he continued, the external conditions are likely to continue to pose substantial risks to Indonesia’ growth outlook. The persistence of uncertainty regarding global trade tensions and the possibility of further tightening of United States monetary policy may lead to further capital outflows and financial volatility among emerging market economies, including Indonesia.

He continued, measures such as implementing free trade agreements and revising the negative investment list to reduce restrictions to investment from abroad will boost Indonesian competitiveness and create good jobs that can move more Indonesians into the middle class.

For us, to magnet investors come to Indonesia, the Government should create friendly regulation and consistent run the policies without give any doubt to them. Recently, inconsistency on government policies has give bad signal to the global investors.

by Linda Silaen and TIS Intelligence Team