Indonesia’s Investment Recovery Strategy

The unpredictability of COVID-19 cases makes no one knows for sure when the pandemic will be over and when exactly economic activities can return to normal. However, many experts, including Lilis Setiadi from Batavia Prosperindo Aset Manajemen (BPAM), expect the recovery to happen in 2021. Note that the recovery will be neither significant nor sharp, but in a U shape.

Sri Mulyani, the Minister of Finance, stated that Indonesia’s economy and investment recovery fully depend on the readiness of vaccines for the Coronavirus. Moreover, the global economic recovery will greatly affect the economic state in Indonesia. “If the handling is proven to be effective and goes hand-in-hand with the re-opening of economic activities, we may expect the economy to recover in the third quarter-2020 with positive growth of 0.4% and will accelerate to 3% in the fourth quarter,” explained Sri Mulyani.

If everything goes according to plan, Indonesia’s economic growth in 2020 will stay in the positive zone, making it possible to make a strong recovery in the first quarter of 2021. This will directly affect investment realization in Indonesia. Throughout the year, the Indonesia Investment Coordinating Board (BKPM) has managed to adapt and arrange a new set of procedures to further promote investment in Indonesia. Bahlil Lahadalia, the Chairman of BKPM, proposes six investment recovery strategies for 2021.

Focusing on a bigger scale of investment and expanding the positive list

The six investment recovery strategies will be implemented to empower BKPM in reaching next year’s investment realization target, a total of Rp858.5 trillion. The main goal for these strategies is to support Indonesia’s economic growth in the upcoming years.

The first strategy to be done in 2021 is to execute pending or stalled investment projects and large-scale investments. Instead of waiting for the investors to approach BKPM, Bahlil stated that it is time for BKPM to be one step ahead and be the one who approaches the investors. According to Bahlil, this will be effective in creating more job opportunities by attracting more investments in Indonesia.

Furthermore, the second strategy from BKPM is to expand the positive list of investment. However, the list will not include the MSME sector.

Investment opportunity map and investment relocation

The third strategy is to design the regional investment potential map, which will help in attracting investors to invest in Indonesia. This strategy will be done in collaboration with BAPPENAS. “BAPPENAS agrees with our proposal to create the regional investment potential map synergized with existing ministries/institutions. This map will become promotional material used by Ambassadors and representatives of BKPM to attract investors,” said Bahlil.

The fourth strategy is to facilitate foreign investment relocation to Indonesia. For this particular strategy, BKPM has formed a task force team with three specific duties which focused on ensuring more foreign companies will relocate their investment to Indonesia. The task force has conducted marketing intelligent to attract the companies that soon will leave China and research on the existing facilities for foreign investors in the competing countries. The government and BKPM have implemented several actions to lure these foreign investors, including the development of the industrial area in Batang, Central Java. Bahlil plans to learn from the 2017-2018 case, where Indonesia failed to catch any of the 33 foreign companies that relocate their investment from several countries.

Deregulation and license integration

Even though BKPM has successfully developed various online applications, Bahlil stated that there is still a lot of needs to be addressed. This is manifested in the fifth strategy which is deregulation and license integration. BKPM will provide the necessary hardware and software to integrate all regional applications into the central.

Last but not least, the final strategy is to implement debottlenecking and aftercare for the investments by performing mentorship for the investors.