Steady Growth Marks Indonesia’s Investment Climate

   

The pandemic has affected almost all sectors in Indonesia. However, Indonesia has been able to keep the game up with support from the Ministry of Investment/BKPM. The Ministry of Investment/BKPM is in charge of implementing policies and serves to coordinate investment in accordance with Indonesia’s regulations. They act as the focal point to connect all investment sectors in Indonesia.

The Ministry of Investment/BKPM, as a government institution, has made many efforts to keep Indonesia’s investment climate stable. These efforts include easing the licensing system especially for the medical sector, giving fiscal incentives, as well as other forms of support. All these efforts are done to respond to the high interest of business actors in applying for health permits during this pandemic.

Indonesia’s Investment Realization in 2021

Detailed information of Indonesia’s investment realization is released by the Ministry of Investment/BKPM every quarter. This data includes information about both foreign and domestic investment realization based on the sector and location.

In the first semester of 2021 (January to June) the Ministry of Investment/BKPM has revealed that the investment realization entering Indonesia has reached Rp442.8 trillion. This achievement has met 49.2 percent of this year’s investment target of Rp900 trillion. This achievement is to be celebrated as it is 10 percent 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.

As stated above, the investment realization can be looked at based on location and sector. Based on the location, the investment flow in Java is Rp214.53 trillion or 48.5percent. 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 investment, both from domestic and foreign direct investment, flowed into the Housing, Industrial Estate and Office Building sector worth of Rp60.7 trillion, Metal, Metal Goods, except Machinery, and Equipment Industry Rp57.6 trillion, Transportation, Warehouse and Telecommunication Rp53.5 trillion, Electricity, Gas and Water Rp44.3 trillion, and Food Industry Rp36.6 trillion.

Indonesia’s Current Investment Climate

Indonesia is a country with great potential. The huge population, rich natural resources, competitive and creative human resources make Indonesia an ideal place to invest in. It is essential to highlight all of its potential to future investors.

Thus far, the Indonesian government has managed well in terms of recovering the economy in a very careful way. They have done it by creating various programs to control the Covid-19 pandemic including the provision of vaccines and fiscal policies including government assistance to MSMEs, tax relief and credit relaxation as well as improving the investment climate in order to achieve this year’s economic growth target. The fiscal incentives are given to investors who invest in priority investment sectors in Indonesia.

Transformation and reformation of the investment process in Indonesia has also been done by establishing the Job Creation Law or UU Cipta Kerja. The Job Creation Law allows investors to obtain a license through the Online Single Submission (OSS) system online, thus eliminating the need to go to multiple ministries or government institutions. This means that the government has simplified and accelerated the licensing process with the latest technology, thus making investing in Indonesia a hassle-free process.

Priority Investment Sectors in Indonesia

As part of Indonesia’s target to accelerate its digitalization in the 4.0 era, Indonesia has established seven priority sectors that are the best option to invest in at the moment. These seven sectors have had steady growth over the years.

Initially, there were five priority sectors for investment, which are food and beverage, automotive, electronics, chemicals, and textile and clothing. The Covid-19 outbreak has paved the way for two new sectors, the pharmaceutical and medical tools industry. The pharmaceutical and medical tools industry has been high in demand because of the pandemic. These seven sectors were chosen based on the impact they will have and the ease with which industrial technology can be implemented. Thus, these seven sectors are designated as priority sectors at this time.

It can be seen that Indonesia’s investment climate has had a steady growth, thus making it one of the best places to invest. By investing in the priority sectors, future investors will have the full support of the government in every step they take.