ASEAN KEY DESTINATIONS
Growth in Indonesia FDI commitments slows in 2014
GROWTH in foreign investment commitments in Indonesia slowed in 2014, an election year, but interest is expected to pick up this year with a push by the new administration to speed up infrastructure projects and reduce red tape.
Foreign direct investment (FDI) commitments to Southeast Asia’s largest economy rose 13.5 per cent for full-year 2014, the Investment Coordinating Board (BKPM) said on Wednesday, much slower than the 22.4 per cent increase in 2013.
The head of the board said investors were in a “wait and see” mood last year. Parliamentary elections were held in April and presidential polls in July, with both candidates initially claiming victory.
Commitments rose 10.5 per cent in the October-December period from a year earlier, compared with 16.9 per cent in the third quarter, following a slowing trend since the beginning of the year. Actual spending figures were not immediately provided.
President Joko Widodo, who took office on October 20, wants to spur economic growth from an estimated 5.1 per cent in 2014 to 5.8 per cent this year, mainly by relying on higher investment.
He has set a modest target for FDI to reach 343.7 trillion rupiah (US$27.52 billion), up 12 per cent from 307 trillion rupiah in 2014 for investments recorded by BKPM, which exclude data for banking as well as the oil and gas sector.
In an attempt to improve the investment climate, BKPM on Monday began to serve as a one-stop service for all investment licenses. Analysts said the move could help attract investors because they no longer have to fill in reams of forms and travel miles to get permits.
Widodo also has to tackle other hurdles to investment such as land acquisition issues, and should provide tax incentives to attract more investors, said Juniman, a Jakarta-based economist with Bank Internasional Indonesia.
“Ultimately though, the government will have to protect Indonesia’s attractiveness by boosting productivity as well, especially as wages continue to creep up across the country,” said Wellian Wiranto, an economist at OCBC in Singapore.
The finance ministry has promised to revise several tax incentives. It has already scrapped a land tax that companies paid while exploring for oil and gas, a move seen as a positive step by the industry.
Indonesia needs huge FDI to help plug its wide current account deficit, predicted at three per cent of gross domestic product this year, above the central bank’s healthy range. Commitments from China rose significantly in 2014, with China making it into the top five investors by country for the first time ever in the fourth quarter, said Azhar Lubis, deputy chief of BKPM.
China’s investment commitments more than doubled to US$800 million last year from US$328.7 million in 2013, ranking it eighth for the full year.
By country, the biggest sources of FDI commitments in 2014 were Singapore, Japan, and Malaysia.
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