THE PROSPECT OF DIRECT INVESTMENT 2013

Many facts had been disclosed about Indonesia’s comparative advantage against other countries. From vast population, growing economy and political stability, were all Indonesia’s comparative advantage. Crowed with the investments grade rating in 2011, now Indonesia’s magnetic appeal was complete whereby to drum up direct investment.

It was not an exaggeration that the Coordinating Board of investments (BKPM) as guardian of direct investment, stated their optimism to attain the figure of Rp 300 trillion in realizing direct investment for 2012. If such were attained, it means that the figure had surpassed the target set before at Rp 283.5 trillion or around 106% of the target.

BKPM theme selves had stated that realization of PMA and PMDN investment through January-September 2012 had reached the amount of Rp 229.9 trillion or 81% of 2012 target. Compared to attainments of the same period of 2011 (Rp 181.0 trillion), there wan an increase of 27.0%.

The attainment made BKPM certain that formation of the Gross Fixed Capital Formation (PMTB) or direct investment could sustain Indonesia’s growth at above 6% or in the range of 6.2% -  6.4% for this year 2012. In spite of downturn in total export, economic growth could be compensated by investment. Investment (PMTB) today was noted to grow by 10.5% - 10.8%.

In Direct Investment, it should be differentiated between domestic investment (PMDN) and Foreign Investment (PMA) in quarter III 2012 there was increase of 32.6% compared to same period of 2011 from investment realization of Rp 19.0 trillion to become Rp 25.2 trillion.

Meanwhile realization of PMA investment over the period of quarter II 2012, compared to same period of 2011 also increased by 22.0% of investment realization of Rp 46.4 trillion to become Rp 56.6 trillion.

Meanwhile outspread of PMDN realization based on top five business sectors were non-metal Mineral Industry (Rp 5.9 trillion); Food Industry (Rp 4.6 trillion); textile industry (Rp 2.6 trillion); Plantation and Garden (Rp 2.0 trillion) and contraction (Rp 1.9 trillion).

Not less than PMDN distribution of PMA realization based on business sector (top 5) were: Basic Chemical Industry; Chemicals and Pharmaceuticals (USD 1.1 billion); Transportation, Warehousing and Telecommunication (USD 0.8 billion); Paper, Goods and Printing Paper (USD 0.7 billion); and Industry and industrial Transportation etc (USD 0.5 billion).

Meanwhile distribution of PMA realization based on project location (top 5) were: Greater Jakarta (USD 1.2 billion); West Java (USD 1.0 billion); East Kalimantan (USD 0.7 billion); Central Sulawesi (USD 0.6 billion) and Riau (USD 0.6 billion).

Sector wise the situation was most heartening because for the most part projects were included in the labor-intensive sector so they could absorb more manpower. Unfortunately by location most of the direct investment were still concentrated in Java. This was understandable because Java had better infra structure compared to other regions outside Java.

This was big homework for the central Government to immediately build and rehabilitate the condition of infra-structure outside Java. One thing to be watched on was inter-regional discrepancy was widening unless infra-structure building was equally distributed nationwide.

Back to the prospect of direct investment: it was true that in the past 4 years Indonesia had been the world’s centre of attention especially investors. Indonesia emerged as a nation with impressive economic growth.

It came as no surprise that the adverse economic condition in other past of the world indirectly served as “blessing” for Indonesia because of entering the radar screen of global investors. Again, one of the magnets that drew investors to Indonesia was the enormous market and high purchasing power of buyers.

However Indonesia must not sit on her laurels by not doing anything to secure her position. The point was, in line with betterment of global economy, if economy of other nations were recovered Indonesia would again lose her appeal. Today Indonesia was compared to a beautiful girl standing alone while other girls fell.

However if economy of other nations rebound, the beauty of a girl named Indonesia would be rivaled and probably lose the competition. The Government and all stakeholders must be aware and be cautious about it.

The great challenge faced by Indonesia was poor infra structure. As noted today the cost of infra structure in Indonesia was 14%, equal the cost of manpower. With the high cost of infra structure, the chain of production supply became expensive.

Other problems were bureaucracy which were not entirely reformed and creating legal uncertainly and inefficiency. Unexpected expenses were still high due to inefficient bureaucracy was evidently still high, i.e. around 12%.

So, reformation of the bureaucracy was still necessary up to the point where index of corruption was equal to neighboring countries like Malaysia and Thailand while Indonesia’s index of competitiveness was also comparable to other countries.

If all were realized, the opportunity to engage investors, domestic or foreign, would be greater and therefore the target of booking direct investment of Rp 281 trillion or even Rp 300 trillion by 2012 was not impossible to attain. Certainly it would be precious asset to jack up direct investment which would ne even greater in 2013. (SS)

Business News - January 02, 2013