JAKARTA (TheInsiderStories) – Political volatility within the next two years is unlikely to disrupt the Indonesian economy. Such optimism was shared by a number of government officials and business leaders when referring to simultaneous 2018 regional elections held across the nation, as well as the 2019 parliamentary election and the 2019 presidential election.
Various political shocks that occurred in Indonesia are unlikely to affect the economic growth rate next year. Burhanuddin Muhtadi, Executive Director of Indonesian Political Indicator and Research Institution of Indonesia, expressed his opinion about the political condition in Indonesia, a phenomenon often considered tangent to economic well-being of the nation.
“Many people appraise Indonesian politics as inherently unstable. Think of this as simply a minor shock, which can always be handled. I am of the opinion that this political upheaval will not affect Indonesia’s economic growth, because the most important aspect is a positive perception of society on the economy,” he said (21/11).
From an industrial perspective, Minister of Industry Airlangga Hartarto said the government is focusing on creating a conducive investment climate with various strategic measures, such as issuing a package of economic policies to expedite the operation of industry and business in the country.
“Over the next two years, total investment value is projected to reach US $17 billion,” he affirmed.
The increase in the ‘ease of doing business’ (EoDB) ranking issued by the World Bank has set Indonesia’s overall ranking in 2018 19 levels higher, from 91th position to 72th position, based on a survey of 190 countries. In the EoDB 2017, Indonesia’s position also increased by 15 places, from 106 to 91.
BNI Securities Analyst Norico Gaman pointed out how economic fundamentals in Indonesia still have positive growth rate and consistency. He pinpoints the opportunity of the inflow of foreign funds following the granting of ‘investment grade’ by three different credit rating agencies.
“In fiscal management, the government has a strong commitment to pay its obligations, especially related to its foreign debt, so as not to arouse any negative market perception; this has become a main attraction for investors,” he said.
However, there are three things that the government needs to do to invite foreign investors. First, the government should be able to provide confidence for investors, by maintaining a conducive investment climate in the country. Secondly, the government has to maintain political stability, while at the same time providing ease in granting licenses for investors to do business in Indonesia.
Investment in Trade and Fintech
Trade business, advertising and the hotel and restaurant business is estimated to grow in 2018, following demand from several big events, such as IMF-World Bank Meeting and Asian Games 2018, according to Institute for Economic and Development Finance (Indef) analyst Bima Yudhistira.
“As in the 2014 elections, buying power in 2018 will likely strengthen, thanks to the stimulus of social assistance, village assistance funds and political spending. All of these will uplift lower-class buying power,” he said.
In financial portfolios, Suwignyo Budiman from PT Bank Central Asia Tbk, (BCA) stated that the investment in financial services next year will be heading toward technology and innovation.
Startups, he added, are trying to navigate the regulatory landscape. Banks will have to find a way to develop new platforms while overcoming legacy infrastructure; startups will have to find a way to scale up their businesses while facing increased regulations, higher costs, and more complex infrastructure that will be difficult to change and manage.
“Technology disruption is changing the financial services industry at a rapid pace. Change and disruption have become the ‘new normal’,” he said.
Lili Yan Ing – Special Staff on Strategic Issues for International Relations of the Ministry of Trade, explained that Asian countries, including Indonesia, are now in control of the largest manufacturing market share in the world.
Indonesia is in fourth position in terms of manufacturing market share in the world after China, Korea and India.
“One factor contributes to the high growth rates in Asian countries, especially East Asia: the application of global value change, by which each country produces goods and then exchanges with one another,” she said.
In the trade sector, one of the factors that the government focuses on is how Indonesia can expand with trading partner countries in order for Indonesian entrepreneurs to obtain access to a wider world market.
In this regard, the government also emphasizes the active role of private parties, particularly banks, in supporting capital for the manufacturing sector in Indonesia.
Written by Elisa Valenta, email: email@example.com