By: Edwin Effendi *)
The development of the downstream industry of Natural Resources (SDA) is currently one of the government’s focuses in promoting economic growth. Currently, Indonesia is making various efforts to reorganize the economic order so that it can survive in the midst of the threat of a recession in 2023 so that the momentum for downstream natural resource investment is believed to be able to attract investors and improve Indonesia’s export performance.
Downstreaming is a strategy taken to increase the added value of our commodities. With the downstreaming, in the future our exported commodities will no longer be in the form of raw materials but finished goods.
In addition to increasing the selling value of commodities, the purpose of this downstreaming is to strengthen the industrial structure, provide more jobs, and increase business opportunities in the country by facilitating business actors and knowing what investors need.
Minister of Investment or Head of the Investment Coordinating Board (BKPM), Bahlil Lahadalia attended the Indonesia Investment Forum (IIF) 2022 which was held in London, England on October 27, 2022 local time. The implementation of IIF 2022 is a collaboration of the Indonesian Embassy in London, the Indonesia Investment Promotion Center (IIPC), and the London Representative Office of Bank Indonesia (BI), supported by Asia House in London. This forum was attended by 200 business players from Europe and Bahlil Lahadalia had the opportunity to give a speech related to the development of the investment climate in Indonesia. Bahlil Lahadalia explained that the realization of foreign direct investment (PMA) in Indonesia from January to September 2022 was IDR 479.3 trillion, an increase of 44.5%.
Bahlil Lahadalia assured that currently Indonesia has good potential and national economic resilience when compared to other G20 member countries. Indonesia’s inflation rate is still in the range of 5% as of September 2022. Few countries in the world have a posture of investment potential and strong national economic resilience like Indonesia. This is a positive value for Indonesia to collaborate and increase foreign investors to enter Indonesia.
The British Investment Minister, Lord Dominic Johnson, welcomed the opportunity for investment cooperation between the Indonesian government and the UK. This is because this investment is believed to have the potential to encourage the entry of two-way investment between countries and support the guarantee of the availability of mineral resources that are important for both countries. Johnson added that investment in the trade sector can make the UK learn how to utilize the Mineral Resources owned by Indonesia and the UK can also contribute from the aspect of Human Resources and technology.
Meanwhile, the Indonesian Ambassador to the United Kingdom, Desra Believe expressed his appreciation for the support of the Minister of Investment, Bahlil Lahadalia in the IIF 2022 event in London. Through this forum, Desra Believe hopes that Indonesia can take advantage of as many investment opportunities as possible.
Not only the UK, HDF Energy also welcomes the opportunity for investment cooperation with Indonesia. HDF Energy plans to invest in the development of 20 renewable energy projects with a total investment of US$1.5 billion. Deputy CEO of HDF Energy, Jean-Noel de Charentenay, is interested in investing in Indonesia because it can guarantee the stability of electricity supply throughout Indonesia. According to the BKPM report, HDF Energy has sought to develop the first renewable energy project in Indonesia with a target in eastern Indonesia. The plan is that the project will be developed in stages starting from Sumba, NTT which will then be expanded to other eastern parts of Indonesia.
Please note, HDF Energy is a power generation company that utilizes green energy such as wind and solar which is supported by battery technology to store green energy sources.
Furthermore, the Coordinating Minister for Maritime Affairs and Investment, Luhut Binsar Pandjaitan, is optimistic that investment attractiveness in Indonesia will remain high during the recovery period after the Covid-19 pandemic. Luhut added that the mining sector also has a fairly high contribution to the realization of national investment. The added value of downstream manufacturing is able to support investment in the mining industry.
Indonesia is still an investment destination for national and global manufacturing industry players. This is reflected in the realization of investment in the manufacturing industry sector which reached Rp. 365.2 Trillion from January to September 2022. This achievement increased by 54% compared to the same period in 2021 which was Rp. 236.8 Trillion.
Referring to data from the Ministry of Investment or BKPM, from January to September 2022, the manufacturing industry sector contributed 40.9% to total investment which reached Rp892.4 trillion. Cumulatively, investment in Indonesia grew by 35.3%, and over the last 9 (nine) months it has managed to reach 74.4% of the target of IDR 1,200 Trillion in 2022.
To facilitate investment in downstream natural resources, the government focuses on time and cost efficiency required in licensing, transparency, and speed. For regions outside Java, the government provides incentives and other services to promote equitable national development. The development of this downstream industry is expected to continue to improve the stability of the national economy in the midst of fluctuating commodity market conditions.
*) The author is a Banking, Finance, and Investment Observer at the Institute