Government raises investment target after promising Q1 results

Rachmadea Aisyah

THE JAKARTA POST

The investment Coordinating Board (BKPM) expects total investments this year to increase by double digits following the positive trend recorded in the first quarter of this year.

Earlier this year, the BKPM set a modest 8.4 percent growth target in total investments to Rp. 792.3 trillion (US$55.67 billion) this year after a slow performance in 2018, when investments grew by a mere 4.1 percent compared to 13.1 percent in 2017. 

With the encouraging growth during the January to March period, however, BKPM chairman Thomas "Tom" Lembong said he was optimistic the annual growth would reach as high as 13 percent at the end of this year. 

Total investment rose 5.3 percent to Rp 195.1 trillion by the end of March this year from Rp 185.3 trillion in the same period of last year.

Foreign Investments, which made up over 55 percent of the figure, declined by 0.9 percent yoy to Rp 107.9 trillion, but this was in contrast to the 11.6 percent slump in the previous quarter. 

"Thankfully, we have seen clear signs of recovery in investment trends in the first quarter [...] after investment flows dropped badly in 2018 in Indonesia and worldwide," Tom told reporters on Tuesday, Globally investment flows dropped 20 percent last year according to the United Nations Conference on Trade and Development (UNCTAD)

He also claimed that investor confidence was recovering domestically in response to the result of the presidential election quick vote count, which have put incumbent President Joko "Jokowi" Widodo in the lead. 

"In the eyes of investors, President Jokowi and [vice-president candidate] Ma'aruf Amin are almost certain to win the election, so they [investors] are assured of political continuity and stability in the next five years," Tom said

The rapid penetration of the digital economy across all sectors in Indonesia would also contribute to investment growth, he added, estimating that investment related to the digital economy made up 15 to 20 percent 

Nevertheless, Eko Listyanto, deputy director of the Institute for Development of Economics and Finance (Indef), predicted that investment growth would remain in single-digit figures this year given that both export demand and consumer spending, which greatly encouraged invesment, were still likely to stagnate. 

"In spite of the political certainty after the celection, the government should make sure that there is enough demand domestically and globally," Eko told The Jakarta Post on Tuesday.

He also pointed out that foreign investment had yet to pick up its pace despite economic reforms made by the administration, and furthermore, domestic investment had actually grown by 14.1 percent yoy in the first quarter. Domestic inflows also grew exponentially by 25.3 percent in 2018, as opposed to an 8.8 percent decline in foreign investments in the same year. 

Foreign investment, which is more sensitive to global tensions, still represented a bigger proportion at 55 percent.

"I believe it would be better for the government to seek more domestic investment as it is more resilient to external shocks [...] the government should provide more incentives for local investors because if we look into the recent economic packages, most of the reforms are intended to stimulate only foreign investment, such as the relaxation of the negative investment list [DNI]," Eko said

 

Source: The Jakarta Post