Investment plays key role in regional growth

Kornelius Purba and Made Anthony Iswara



The role of local governments in national development has become increasingly strategic since the launch of regional autonomy in 1999. Two weeks after his inauguration on Oct. 20, 2014, President Joko “Jokowi” Widodo convened a meeting with all pro-convened a meeting with all provincial governors and one month later he also met with regents and mayors. Such meetings have been held annually over the past five years.

But almost 20 years after the launch of regional autonomy, many local governments have not yet fully harnessed broader political and economic development. Investment Coordinating Board (BKPM) head Thomas Lembong recently spoke to The Jakarta Post in Jakarta about the landscape of investment policy in Indonesia and the role of investment in the regional economy. Below are excerpts from the interview.

Question: What is the current landscape of investment in Indonesia?

Answer: I guess it’s more and more widely understood that investment plays a crucial role in economic growth. One successful economic transformation under Jokowi in the last four years has been that the economy is now growing at roughly 5 percent and investment is growing between 6 and 6.5 or even 7 percent. Investment is playing a bigger role in GDP growth as the growth of government spending and exports are still relatively low at 5 percent.

And what’s becoming increasingly clear is that we have new economic growth drivers in the economy. Tourism is one of these. Tourism is booming not only in Indonesia but around the region like Thailand and Singapore. In a speech last year, President Jokowi cited a Bloomberg article that estimated within the next 10 to 15 years, one in every four new jobs worldwide will be created in the tourism and lifestyle sectors. Another is e-commerce and the digital economy.

Those sectors are growing at 15-20 percent per year. Tourism and the digital economy are part of the service sector, which is labor-intensive and which can provide high-quality jobs with high incomes.

I expect other growth drivers to kick in in the next five years. We’ve planted a lot of seeds and have worked extra hard to make Indonesia an attractive and safe destination for investments. But the competition is getting fiercer in attracting foreign capital. Indonesia has to compete with Thailand, Vietnam, Malaysia and India.


How do you see the perception and awareness of local governments with regard to the role of private investment?

What I think is the most significant trend in the last five to seven years is what I would call “the rise of performance culture” in Indonesian politics. About 10 to 20 years ago, politicians and people in power were like kings and queens. The culture was that everyone was expected to serve them. Now, the elected leaders are expected to serve the people.

It’s very clear to me that in running for office and building a political career where you keep moving up from mayor to district chief to central government or ministries, the performance culture now demands what is your achievement? What is your track record of delivering maximum quantity and quality of public service? And that includes how much investment have you attracted? How many jobs have you created? That is how you see the rise of highly rated mayors, governors and district chiefs around the country, who are clearly now identified as leading contenders for vice president in 2024.


Any concrete examples?

One example is the newly elected governor of South Sulawesi, Nurdin Abdullah, whom I’ve never met but I’ve heard so much about. He was a regent in the tiny Bantaeng regency. He studied in japan and he is quite fluent in Japanese. He was able to attract Japanese investment to the district. Based on those tremendous investments, he ran for governor of South Sulawesi. If he continues these types of achievements as governor of South Sulawesi, he would be a leading contender for the 2024 presidential election.


How do you harmonize the interests of regional authorities and the central government?

Our board has an unbeatable international network and database that we can share with regional branches. This is a part of our Online Single Submission (OSS) that we have rolled out in a platform called “workplace”. There are at least 3,000 sectors, 450 city administrations and all of the secretaries general are using it, whether they are in ministries or non-ministries. With such an online platform, we can now interact directly online as a part of our guidance in investments.


Nationally, what is the prospect for investment going forward?

The prospect is very good as we have laid a very good foundation for the next five years and beyond. During the last four to five years, we’ve built more infrastructure nationwide than what had previously been done within 15 years. We have also radically changed the political culture and the mindset in the bureaucracy.

These are all good foundations for the government and society going forward. Having said that, the prospects for investment and the economy will depend mostly on what Jokowi does in the next seven month. Of course, the eyes of all investors around the world are on the Cabinet lineup. That’s why by far, the number one driver of our prospects in investment and economic development in the next five years will be the quality and professionalism of the next Cabinet.