Encouraging Investment and Strengthening the Domestic Economy as the Basis for Economic Equality in Indonesia
By: Yusuf Rinaldi)*
The Indonesian economy has demonstrated strong resilience despite facing various global uncertainties. The government continues to take strategic steps to strengthen the national economic foundations to ensure equitable prosperity across the archipelago. Through policies focused on strengthening the domestic market, optimizing regional potential, and accelerating investment, Indonesia is on track to achieve higher, more inclusive, and sustainable growth in the future.
Coordinating Minister for Economic Affairs Airlangga Hartarto explained that the Indonesian economy is heavily dependent on household consumption, which contributes up to 53.14% to Gross Domestic Product (GDP). This means that the Indonesian economy is heavily influenced by domestic purchasing power. Under these conditions, maintaining and encouraging domestic consumption growth is crucial.
Pro-domestic policies, such as those adopted by the government, focus not only on import control but also on increasing the competitiveness of local products. By improving the quality of domestic products, the domestic market will be more fully occupied by domestic industries, reducing dependence on imports and strengthening the local economy. Strengthening the domestic market is also a strategic step in supporting the growth of the MSME sector, which currently serves as the backbone of the Indonesian economy.
In addition to strengthening domestic consumption, the government is addressing various structural barriers that have hampered the performance of the domestic industry. Finance Minister Purbaya Yudhi Sadewa stated that one of the measures being taken is cracking down on illegal goods that are stifling domestic industry. The government is also continuing to improve the one-stop investment service system, which has been deemed suboptimal, leaving Indonesia lagging behind neighboring countries like Vietnam and Thailand in attracting foreign investment.
The government has now established a “bottlenecking” task force tasked with addressing obstacles in the business world. This step demonstrates the government’s commitment to improving the investment climate to make it more welcoming to both domestic and foreign businesses. Purbaya emphasized that, if necessary, firm action will be taken against those who fail to improve their performance, including directors of institutions that fail to meet expectations.
Indonesia’s domestic market is a top priority for the government. In this context, law enforcement against illegal goods, including smuggled used clothing, is a crucial step to protect the domestic market from imported products entering at lower prices. Such measures not only maintain the sustainability of the domestic industry but also ensure that domestic entrepreneurs can compete fairly in the local market.
The government is also actively developing various policies to improve the competitiveness of domestic products. For example, through the National Online Shopping Day (HARBOLNAS) program, which encourages the growth of digital shopping and increases transactions of local products. Such initiatives help strengthen the position of local products in the domestic market and foster public interest in purchasing domestic products.
In addition to strengthening the domestic market, encouraging investment is also a key part of government policy. In the investment target set by the Minister of Investment and Downstreaming/Head of the Investment Coordinating Board (BKPM), Rosan Roeslani, Indonesia is seeking to attract Rp 13,032 trillion in investment over the next five years, with a focus on strategic sectors such as manufacturing, energy, and natural resource downstreaming. This is expected to create new jobs, expand key economic sectors, and increase Indonesia’s economic competitiveness in the global market.
These strategic sectors are expected to have a more equitable positive impact across Indonesia. By focusing investment in sectors that have the potential to increase the added value of local products, Indonesia will not only strengthen its international competitiveness but also ensure economic equality through job creation across various sectors.
The government has an ambitious target of achieving 6% economic growth by 2025 and moving towards 8% in the next four to five years. To achieve this goal, policy consistency and structural reforms are key. As Purbaya stated, sustainable economic growth will be achieved if there is a balance between fiscal policy, investment, and strengthening the domestic market.
The government’s reforms in the trade and investment sectors are also in line with policies supporting economic equality. By strengthening the domestic sector and targeting investment, the Indonesian economy will be able to grow inclusively, benefiting all levels of society.
The MSME sector has also received serious attention from the government in an effort to accelerate economic equality. MSMEs, spread across various regions in Indonesia, play a crucial role in the local economy. The government encourages MSMEs to focus not only on the domestic market but also to expand their reach to international markets. With support in the form of financing, regulatory streamlining, and training, MSMEs are expected to increase production capacity and compete in the global market.
With 90% of economic activity driven by domestic demand, focusing on strengthening the domestic market is becoming an increasingly relevant strategic move. Solid national consumption support provides Indonesia with the opportunity to not only maintain stability but also to continue to progress and achieve even better growth going forward.
)*The author is an economic observer
