The Ministry of Investment/Indonesia Investment Coordinating Board (BKPM) is a Government Institution that is in charge of implementing policies and serves to coordinate investment in accordance with Indonesia’s regulations. The Ministry of Investment/BKPM will be the focal point for connecting all investment sectors from the technical ministries. As the main link between businesses and the government, the Ministry is responsible for creating a conducive investment climate.
The BKPM releases detailed information of Indonesia’s economic growth every quarterly. This data includes foreign and domestic investment realization based on sector and location. The data is based on the report received from the Investment Activity Report (LKPM) that the BKPM receives from foreign and domestic investment companies in Indonesia.
The investment realization data excludes investment in the Upstream Oil and Gas sector, Banking, Non-Bank Financial Institutions, Insurance, Lease, Home Industry, Micro and Small Business. The report can be compared year-to-year or quarter-to-quarter basis. The exchange rate used is US$ 1 = Rp 14,600 according to the state budget (APBN) 2021.
Indonesia’s Investment Realization Development
BKPM has revealed that the investment realization entering Indonesia has reached Rp442.8 trillion in the first semester (January to June) of 2021. This achievement has met 49.2 percent of this year’s investment target of Rp900 trillion.
The Minister of Investment/ BKPM chairman Bahlil Lahadalia, celebrates this achievement, as it is 10% higher than what was achieved in the first semester of 2020. In the first semester of 2020, the investment realization was only Rp402.6 trillion.
Based on the location, the investment flow in Java is Rp214.3 trillion or 48.4 percent. Its growth rose 2.7 percent. Meanwhile, investment outside Java reached Rp228.23 trillion or 51.5 percent of the total. The investment realization grew 17.8% on an annual basis.
Based on sector, the largest domestic direct investment flows flowed to the housing, industrial and office sectors Rp60.7 trillion, metal and other industries Rp57.6 trillion, transportation, warehouse and telecommunications Rp53.5 trillion, electricity, gas and water Rp44.3 trillion, and food industry Rp36.6 trillion.
Investment Realization Supports Indonesia’s Economic Growth
The investment realization received from April to June 2021 has reached Rp 223.0 trillion. The investment realization comes from Domestic Investment (PMDN) of Rp214.3 trillion or equivalent to 48.4% of the total realization that has entered. The rest was filled by the flow of Foreign Investment (PMA) reaching Rp228.5 trillion or 51.6% of the target. Its growth increased 16.8%.
The total investment reached in 2021 is 16.2% higher than that of 2020. In the first quarter of 2020, PMDN amounted to Rp191.9 trillion in the second quarter, whereas the PMDN in the second quarter of 2021 reached Rp223.0 trillion.
PMDN has given a significant contribution to the investment reached during the pandemic. The PMDN contributed 47.6% or Rp106.2 trillion from the total investment reached with the absorption of Indonesian workers as many as 165,684 people or 53.1% of the total employment that occurred. The sector that contributed the most is the housing, industrial and office sectors (19.3%), whereas the project location with the largest investment realization was in East Java (13.1%).
Investment realization has also helped increase employment opportunities in Indonesia. From January to June 2021, employment has reached 623.715 people, consisting of 331,314 PMDN projects (53.1%) and 292,401 PMA projects (46.9%).
The Indonesian President, Joko Widodo, has given a target of Rp 900 trillion in hopes to keep Indonesia’s economic condition under control amid the pandemic. The Ministry of Investment/BKPM is optimistic in reaching this target. The large investment realization that has been achieved up to the second quarter shows that there is a big chance that Indonesia will be able to reach its goal by the end of the year.