Government Steps in Disseminating Investment in Indonesia

   

One of the issues that the Indonesian government has been trying to tackle is unequal investments in Indonesia. Over the years investments have mainly been centered in one area. Investment in Indonesia tends to be Java centric. Investments has a tendency to be Java centric means that the realization of foreign and domestic investment is mostly carried out on the Java Island. This causes economic equity in Indonesia to not run well, so that in the end it has an impact on the country’s economy. National economic equality is important to be pursued to avoid problems in the future. So, although the investments that are focused in Java does have its perks, it also means that other areas experience stunted economic growth.

The government has taken several steps to better disseminate investments in Indonesia.

Investment Potential in Areas Outside of Java

The Indonesian government is optimistic that Sulawesi, Maluku, Sumatra and Kalimantan have high potential. These three areas need to be optimized so that they can become promising investment destinations. The advantage of these areas is the land and its natural resources. For example, Kalimantan has an area almost three times that of Java. Those four areas are blessed with natural resources and a beautiful panorama. In addition, there are natural resources in the form of mining in Maluku, Sulawesi, and Kalimantan.

The Indonesian government has made sure to highlight these areas when discussing investment plans with future investors. If we look at the numbers we have so far, we can see that investment realization by region in the period January to September 2021 shows that investment realization in the Java region is Rp 318.7 trillion (48.3%). The realization of investment in the Sumatra region was Rp 143.9 trillion (21.8%), the Sulawesi region was Rp 71.0 trillion (10.8%), the Kalimantan region was Rp 57.3 trillion (8.7%), and the Maluku and Papua regions with investment realization was Rp 47.2 trillion (7.2%).

Efforts to Disseminate Investments Outside of Java

Supporting the government’s target to disseminate investment in Indonesia, the Ministry of Investment/BKPM has implemented four strategies to improve the investment climate outside Java. First, in line with the massive infrastructure development plan, the construction of toll roads, ports, and road accessibility. This is one of the initial requirements for investors to enter an area. Second, fiscal incentives such as tax allowances in the form of income tax deductions (PPh) are given to investors in certain fields and regions. Third, approaching investors to utilize the positive investment list and investment priorities (DPI) with potential in each region outside Java. DPI also further regulates the obligations of investor and MSME partnerships in order to improve the local economy. Fourth, the implementation of Government Regulation (PP) related to the ease of setting up a business in the regions which is the goal of UU No. 11 of 2020 concerning Job Creation.

The Indonesian economy’s growth has been dominated by contributions from the Java Island for several reasons. One of them is because large industries in Indonesia are still mostly concentrated on Java. More than 52% of the processing industry is still in Java. In fact, there is great potential from other regions such as Sulawesi, Kalimantan, and Papua. The abundant resources of Sumatra and Kalimantan should be able to provide impetus for the industrial sector to grow and develop.

The government’s efforts have not been without success. The achievement of the total realization of FDI and DDI investment in the third quarter outside Java was 49.7% in 2020. Once accumulated, the investment realization in the third quarter of 2021 outside Java reached 51.7%. This shows that President Jokowi’s efforts to convince investors to invest outside Java have yielded positive results. The majority of investments that occur outside Java are in the secondary or industrial sector.

Going forward, the government will continue to strive to ensure equitable investment in Indonesia. Of course, this will be done by promoting the advantages of each region so that investment potential can be seen. Increasing investment is expected to help Indonesia’s economic growth, as well as the occurrence of large employment. Thus, the development of Indonesia can occur properly while maintaining the welfare of its people.