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Realization of Investment to Support the Indonesian Economy

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By: Abdullah )*

The economy in Indonesia is indeed influenced by investment in Indonesia. This is because investment is able to absorb labor thereby accelerating the circulation of existing money.

PT Bank Mandiri (Persero) Tbk. (BMRI) predicts that improved mobility and domestic consumption will improve investment performance in 2022, thereby boosting the overall economic recovery.

Based on data obtained from the Ministry of Investment, it was recorded that in the third quarter of 2022 direct investment reached IDR 307.8 trillion or grew 42.1 percent (year on year) yoy, up from the growth in the previous quarter of 35.5 percent yoy. This performance was supported by the manufacturing, transportation and mining sectors.

Bank Mandiri’s Chief Economist, Andry Asmoro assessed that this performance achievement could contribute positively to the Indonesian economy. Structural and bureaucratic reform agendas can benefit investment in sectors with high multiplier effects or outputs . According to him, the sectors that will benefit are manufacturing and construction. BMRI also believes that Indonesia’s economic growth can reach 5.17 percent this year, with investment growth in the range of 4.0-5.0 percent.         

In his research publication, Andry wrote, “Investment is expected to boost Indonesia’s economic recovery in 2022. As domestic demand continues to strengthen amid improving community mobility following the easing of the PPKM, investment is expected to continue the upward cycle.

The investment momentum will also be supported by ongoing reforms in the downstream natural resources sector as the reforms have succeeded in attracting significant investment into the base metals sector which in turn strongly supports Indonesia’s export performance.

Although the risk of a global recession is increasing, foreign direct investment (FDI) is recorded to have contributed up to 54.9 percent of direct investment in the third quarter of 2022. This is apparently due to high commodity prices, ease of business rules and licensing, and efforts to streamline investment procedures.

Domestic Investment (PMDN) contributed 45.1 percent to the investment in the third quarter of 2022. The largest sectors are metal industry, metal goods, except machinery and equipment (14.3 percent direct investment); transportation, warehouse and telecommunications (10.6 percent); housing, industrial estates and office buildings (9.4 percent); mining (9.2 percent); and electricity, gas and drinking water (8.8 percent).

Previously, Bank Indonesia (BI) Governor Perry Warjiyo was optimistic that investment would support the economy in 2022, to grow in the range of 4.7 percent to 5.5 percent.

In addition to investment, household consumption which is slowly increasing due to accelerated vaccination and the opening of several sectors will also help economic growth this year.

Perry said inflation will indeed increase but he believes that in 2022 it will remain on the target of two percent to four percent. According to him, improving consumption will also be driven by improved credit growth and the massive digitization of the payment system in Indonesia.

Meanwhile, Indonesia’s current account deficit will increase this year, although it remains low at between 1.1 percent to 1.9 percent, so it will still support external stability along with strong foreign exchange reserves.

Therefore, favorable conditions in the country will withstand global risks, such as rising inflation in developed countries and changes in the policies of several world central banks.

The Minister of Investment/Head of BKPM, Bahlil Lahadalia said, the increase in the investment realization rate in the second quarter of 2022 by 7.0 percent is in line with national economic growth which is predicted by a number of economic observers to be more than 5 percent, exceeding the first quarter of 2022.

Investments outside Java received a large contribution from Central Sulawesi Province, which was ranked third and Riau, ranked fifth. Apart from these two regions, the top five positions were occupied by the Provinces of West Java, DKI Jakarta and East Java, which still contributed greatly to investment realization this quarter.

Regarding the realization of investment achievement, Coordinating Minister for Economic Affairs Airlangga Hartarto appreciated the increase in investment in Special Economic Zones (SEZs). He also said that the impact of these improvements can be seen from the rapid progress of the four SEZs set in 2021, after the issuance of the Job Creation Law.

The SEZs in question include the Nongsa SEZ and Batam Aero Technic SEZ in Batam, Riau Islands Province, Lido SEZ in West Java Province and Gresik SEZ in East Java. The four SEZs within one year have realized an investment of IDR 29.1 trillion and new jobs of 9,746 people.

In the future, investment potential in SEZs can be further increased so that new job opportunities can be further expanded so as to increase the multiplier effect that is beneficial to local communities.

Realization of investment in Indonesia is still needed to support the Indonesian economy, this investment will cause a multiplier effect in which the velocity of money will be more intense.

)* The author is a contributor to Persada Institute

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