Indonesia’s resilient economy lures investors

Having pulled out of recession in the second quarter of 2021, Indonesia’s economic recovery proves to be potential for investments.

Southeast Asia’s largest economy managed to grow 7.07 percent in April-June 2021 quarter compared to last year. Despite the challenges of COVID-19 pandemic, Indonesia agreeably pulled out of recession as direct investment realization returns in the second quarter of the fiscal year.

A 56 percent growth in commodity shipments, rebound in consumption and investment as well as bigger government spending have successfully rejuvenated the economy. On top of that, foreign investments have started to trickle into projects not only in Java, but also in North Maluku, Central Sulawesi and Riau. In total, the foreign investment’s realization in the second quarter of this year has reached Rp116.8 billion from a total of Rp223 billion. This signifies foreign investors’ trust to invest in Indonesia.

The government’s rapid national vaccine rollout and the National Economic Recovery (PEN) program have proven effective in accelerating the economy. Furthermore, structural reforms through the Job Creation Law Number 11 of 2020 has also proven useful in simplifying regulations, encouraging job creation, increasing ease of doing business, and improving the investment climate.

The law is an important instrument in ensuring potential investors before entering Indonesia. Now, starting a business is estimated to take around 2.5 days compared to the previous 10-day period. This efficiency will undoubtedly improve the nation’s standing in World Bank’s ease of doing business (EODB) report.

Other notable improvements include a revamped firm registration online single submission (OSS) platform. The business licensing platform’s goal is to simplify the process using a risk-based approach, allowing low-risk businesses to get the required business registration number faster. The government has also lowered the corporate tax rate to 22 percent and aims to bring it even lower to 20 percent next year.

The Ministry of Investment has also prepared four strategies to retain a positive investment climate amid the pandemic. They facilitate existing companies that are already operating in Indonesia to overcome obstacles; facilitate stalled investments; bring in new investments to Indonesia; and provide incentives to companies that plan on executing expansion plans.

With these strategies in place, more foreign investments are projected to pour into Indonesian equity holdings in the next few years. Expect growing foreign interests in stock market, direct manufacturing capacity and infrastructure financing.

Indonesia’s business transformation process is good news for investors, both foreign and domestic, as well as the region’s economy. Even though the pandemic remains to pose a threat against global economy, Indonesia’s resilient economic performance is evidence of the people’s determination in overcoming the challenges that lay ahead.