Investment hit another record high of Rp81.8 trillion in the third quarter of 2012, signalling that the country remains one of the favorite investment destinations in the world.
Jakarta (ANTARA News) - Indonesia`s policy to provide incentives, coupled with economic resilience to the global slowdown has provided a stimulus to the inflow of investment, with the Investment Coordinating Board (BKPM) projecting investment to exceed the target of Rp283.5 trillion for this year.

Investment hit another record high of Rp81.8 trillion in the third quarter of 2012, signalling that the country remains one of the favorite investment destinations in the world.

According to the results of a survey conducted by the ASEAN Business Advisory Council (ABAC) this year, Indonesia ranked first among 10 ASEAN member states in terms of investment destination. The survey which questioned a total of 405 businesspeople and industry leaders put Vietnam in the second place, followed by Singapore, Thailand, Malaysia, the Philippines, Laos, Cambodia, Myanmar and Brunei.

The robust investment growth was also inseparable from the international credit rating agencies` decisions to raise Indonesia`s sovereign debt rating to investment grade. Indonesia regained the investment grade status after the nation lost it during the height of the financial crisis engulfing some of Asian countries in 1997.

The investment grade rating means that Indonesia has resilient economic growth, low government debt and prudent policy, which many believed would encourage further foreign investment.

The strong investment inflows have contributed to the country`s economic growth which is projected to expand more than 6 percent this year.

In its report the Asian Development Bank (ADB) predicted investment will contribute about 40 percent of Indonesia`s economic growth next year. The forecast is based on the fact that Indonesia successfully carried out many reform programs and investor-friendly policies that had helped improve its image among both foreign and domestic investors.

Head of the budgetary affairs sub-directorate at the Finance Ministry Agung Widiadi said the global financial crisis had no impact on the inflow of foreign investment to Indonesia in the first nine months of 2012.

Investment in Southeast Asia`s largest economy reached Rp229.9 trillion in the year to September 2012, with foreign investment increasing 27 percent to Rp164.2 trillion and domestic investment rising 26.3 percent to Rp65.7 trillion. In the third quarter alone, investment increased 25.1 percent to Rp81.8 trillion, he said,

The higher-than-expected investment performance in the quarter ending September had shored up the government`s confidence that investment this year will reach Rp300 trillion-Rp310 trillion, ahead of its initial target of Rp283.5 trillion.

"While the uncertainty of the global economic outlook as a result of the slow pace of economic recovery in the US and a number of European countries casts a shadow over prospects for the global economy, investments in Indonesia have shown an upward trend," BKPM chief Chatib Basri said at a seminar "Economic Outlook 2013 from the Perspective of the Uncertainty of the Global Economy" in Jakarta early this month.

Even in the midst of global economic uncertainty, Indonesia had a better chance of attracting investment than any other countries such as India, China and Vietnam, he said.

Today, the looming US fiscal cliff had prompted Europe to launch economic recovery measures through a fiscal contraction policy, he said.

"Under these circumstances, no country is likely to take fiscal and monetary contraction measures at the same time. European countries through the European Central Bank (ECB) will no doubt inject huge sums of liquidity into the monetary system," he said.

To spur its growth the US had adopted the third round of the so-called quantitative easing (QE) or face its economy to come to a standstill, he said.

The ECB and the Fed will no doubt inject huge sums of liquidity. But the funds will unlikely go to Europe and the US but will be invested in emerging economies including Indonesia, he said.

"If the funds are not invested in Indonesia, then where they will go? India is facing a stubbornly high inflation and trade balance, Vietnam which has its bond rating downgraded is going to ask for assistance form the IMF and China is seeing the phase of slowdown," he said.

Therefore, Chatib said Indonesia must soon catch the huge investment opportunities by improving investment services. "We must improve investment services. Do not let investors have difficult access to information on investment opportunities in the country any longer," he said.

Lengthy bureaucracy is one of the major hindrances to investment in the country. To deal with the problem, the BKPM has launched an on-line tracking system which enables investors to find investment information, and know the extent to which their investment proposals have been processed.

Industry Minister M.S Hidayat said complicated bureaucracy and the lack of legal certainty posed an obstacle to increasing investment in the manufacturing sector.

"The main obstacle to increasing investment in the manufacturing sector is inefficient bureaucracy. In addition, the lack of legal certainty is one of the factors investors have to consider to invest their capital," he said at a national working meeting of the Indonesian real estate developers association in Jakarta.

The development of investment and infrastructure will still become the center of the government`s attention next year to maintain the momentum of national economic growth.

Coordinating Minister for Economic Affairs Hatta Rajasa said after accompanying President Susilo Bambang Yudhoyono aboard the Indonesian warship KRI Makassar to inaugurate a number of projects that the economic growth of above 6 percent projected for 2012 should be maintained and increased to 7 percent in 2014.

"We must maintain the momentum of growth from the standpoint of supply and demand. We should not see it from a demand side only. The key lies with investment so we must improve infrastructure to increase investment," he said.(*)

Reporter: Suharto
Editor: Heru Purwanto
Copyright © ANTARA 2012