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Government Guarantees Foreign Investment in Indonesia

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By: Alfisyah Dianasari )*

The government guarantees domestic and foreign investment to continue to develop its business in Indonesia. One way to do this is by issuing the Job Creation Law, which cuts down on regulations while providing legal certainty to investors.

Previously, Indonesia was known as a country that was complicated in terms of business licensing, this had become an assumption that Indonesia was a country that was not investment-friendly. However, the current government is starting to improve so that incoming investment in Indonesia is not hampered by complicated regulations.

On the occasion of a working visit to the United States, the Head of the Investment Coordinating Board (BKPM) Bahlil Lahadalia together with the Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan held a meeting with 12 leaders of US companies.

On this occasion, Bahlil emphasized that the Indonesian government is very open to collaborative investment and promotes economic equality. Bahlil said that one of the current government policies is to require collaboration between foreign investment and national entrepreneurs. Especially local entrepreneurs and Micro, Small and Medium Enterprises (MSMEs) in the area where the investment is located.

In his official statement, Bahlil said that his party is of the opinion that a growing investment must be utilized by all, and can grow and grow together.

Meanwhile, Luhut Binsar Pandjaitan also said that one of the current focuses of the Government of Indonesia is related to the development of a green economy ecosystem, through the mechanism of energy transition from fossil fuels to renewable energy, restoration of ecosystems such as mangroves, peatlands and tropical forests.

Luhut assessed that the added value policy implemented by the Government of Indonesia since 2014 has had a positive economic impact, especially in the situation of the Covid-19 pandemic. Therefore, the Government of Indonesia now welcomes the interest of foreign investors in sectors related to the green economy ecosystem, especially in the energy transition mechanism and industrial estates, as well as industries with added value.

The company leaders who attended were engaged in various sectors, including data center technology, oil and gas, pharmaceuticals and health, renewable energy, mining smelters, food industry and LED lighting industry.

Based on data from the Ministry of Investment/BKPM, the realization of investment from the United States from 2000 to 2021 has reached 19.5 billion US dollars. Especially in 2021, United States investment experienced a sharp increase of 234% from the previous year with a total investment value of 2.5 billion US Dollars and was ranked 4.

One of the sectors that dominate investment from the United States is the mining, services, utilities, chemical and pharmaceutical industries, and the food industry. Previously, Bank Indonesia (BI) noted that Indonesia’s International Investment Position (PII) increased in the fourth quarter of 2021. At the end of the fourth quarter of 2021, Indonesia’s PII recorded a net liability of USD 278.6 billion or 23.5 percent of gross domestic product (GDP). ). This figure has increased compared to net liabilities at the end of the third quarter of 2021 of USD 277.3 billion (24.2 percent of GDP).

The overall development of Indonesia’s PII in 2021 recorded a decrease in net liabilities compared to the position at the end of the previous year. Indonesia’s PII recorded net liabilities of 278.6 billion in 2021 (23.5 percent of GDP), a decrease compared to the position of net liabilities at the end of 2020 of USD 280.0 billion (26.4 percent of GDP).

Bank Indonesia views Indonesia’s PII in the fourth quarter of 2021 and the whole of 2021 as well as maintaining external resilience. This is reflected in the ratio of Indonesia’s PII to GDP for the whole of 2021 which has decreased compared to 2020.

In addition, Indonesia’s PII liability structure is also dominated by long-term instruments (93.9%) mainly in the form of direct investment. Going forward, Bank Indonesia believes that PII Indonesia’s performance will be maintained in line with efforts to recover the Indonesian economy from the impact of the Covid-19 pandemic, which is supported by the synergy of the policy mix of Bank Indonesia and the Government, as well as other relevant authorities.

In order to increase economic growth, Minister of Finance Sri Mulyani once said that Indonesia must be open to foreign direct investment (FDI) in order to increase economic growth.

Of course, Indonesia must be able to guarantee that investors from abroad feel safe when investing in Indonesia, because with the investment, there will be a lot of manpower absorbed.

)* The author is a contributor to the Press Circle and Cikini Students

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