The Indonesia Investment Coordinating Board (BKPM), the central government's investment services agency, targets to see a 15 percent growth to IDR 594.8 trillion (approx. USD $43 billion) in investment realization in 2016 supported by an improving investment climate in Southeast Asia's largest economy. Franky Sibarani, Head of the BKPM, said the government is particularly eager to see sharp growth in investment realization in the country's manufacturing sector, in infrastructure, services and trade, and in the raw resources industry.
Sibarani said the BKPM targets investment in Indonesia's manufacturing sector to increase by 17.2 percent year-on-year (y/y) to IDR 313 trillion (approx. USD $22.5 billion) in 2016. Meanwhile, investment realization in infrastructure, services and trade is targeted to rise by 10.4 percent (y/y) to IDR 183.7 trillion (approx. USD $13.2 billion) and investment in the raw resources industry is targeted to increase 12 percent (y/y) to IDR 97.6 trillion (approx. USD $7 billion).
Investment realization in Indonesia stands at a combined IDR 400 trillion in the first three quarters of 2015, equivalent to 77 percent of the BKPM's total 2015 investment target (IDR 519.5 trillion) and up 16.7 percent (y/y) from investment realization in the same period last year.
Foreign and Domestic Direct Investment in Indonesia (in IDR trillion):
|Domestic Direct Investment||34.6||38.2||41.6||41.7||42.5||42.9||47.8|
|Foreign Direct Investment||72.0||78.0||78.3||78.7||82.1||92.2||92.5|
|Domestic Direct Investment||14.1||18.9||19.0||24.0||19.7||20.8||25.2||27.5||27.5||33.1||33.5||34.1|
|Foreign Direct Investment||39.5||43.1||46.5||46.2||51.5||56.1||56.6||65.5||65.5||66.7||67.0||71.2|
Source: Indonesia Investment Coordinating Board (BKPM)
In order to attract more investment in the years ahead, the BKPM will raise efforts to improve the ease of doing business in Indonesia, Sibarani said. Regarding human resources and the streamlining of the investment process, the BKPM will seek to improve coordination between ministries, regional governments and private investors in an effort to boost competitiveness of the economy.
Indonesia rose 11 positions in the World Bank's Doing Business 2016 ranking. The nation improved from rank 120 in the (revised) 2015 index to 109 in the 2016 ranking on the back of reforms in investment licensing, online tax payments as well as financing incentives.
However, Indonesia is still ranked far below its regional peers such as Taiwan (11), Malaysia (18), Thailand (49), Vietnam (90), and the Philippines (103). Indonesia's Chief Economics Minister Darmin Nasution said part of the problem is the decentralized structure of Indonesia (democracy and decentralization were processes that started after the authoritarian Suharto regime fell in 1998). This means that the government previously tried to avoid making too much adjustments to investment policies in the regions (as this would conflict with decentralization).
Doing Business 2016 Ranking:
|2. New Zealand|
|4. South Korea|
|5. Hong Kong|
|6. United Kingdom|
|7. United States|
Source: World Bank 'Doing Business 2016'
Ease of Doing Business in Indonesia:
Please note that the 2014 and 2015 rankings are revised rankings
||2014 Rank|| 2015 Rank
|Starting a Business||158||163||173|
| Dealing with Construction Permits
| Getting Electricity
|Protecting Minority Investors||43||87||88|
|Trading Across Borders||61||104||105|
Source: World Bank's Doing Business Reports
The BKPM is also reviewing the country's Negative Investment List (which lists sectors that are fully or partially closed to private foreign and/or domestic investment). Results of this review are expected to be announced in March or April.