ASEAN KEY DESTINATIONS
Investment commitments soar in Sumatra, Sulawesi
Indonesia: The government’s effort to promote equitable economic development in the country is starting to have a positive outcome as the total value of investment commitments outside of Java, the archipelago’s main island, hit a record high in February, accounting for nearly 90 percent of the national figure.
The Investment Coordinating Board (BKPM) revealed earlier this week that the country had booked Rp 355 trillion (US$27 billion) in total investment commitments throughout last month, with Rp 316 trillion planned for capitalization in areas outside of Java.
“Most of the commitments were made by companies from the US, China, Singapore or South Korea,” BKPM chief Franky Sibarani said.
Among the favorite areas for investment, according to BKPM data, are those located in Sulawesi and Sumatra, where each booked Rp 235 trillion and Rp 71.9 trillion last month in investment commitments, respectively.
The trend also confirmed recent findings detailed in the “Joint European Business Confidence Index 2015”, which suggest that more than a quarter of European companies operating in Indonesia are planning to expand their businesses, with over half of them eyeing Sulawesi and Sumatra as potential expansion targets.
British Chamber of Commerce (BritCham) Indonesia chairman Adrian Short said earlier that the finding had demonstrated an increased interest for expansion beyond Java.
The Industry Ministry claimed that some 75 percent of the country’s manufacturers are located in Java, followed by 17 percent in Sumatra and 3.4 percent in Kalimantan.
Java, the country’s most populated island, contributes roughly 60 percent to the nation’s economic growth.
To spread the growth distribution, the government aims to enlarge the portion of realized investment placed outside of Java to 49.1 percent this year from 45.2 percent last year.
Data from the BKPM reveal investment commitments in the country increased by 45 percent year-on-year to Rp 1.8 quadrillion last year.
“Support from local government to turn the commitments into realized investments are very much expected,” said Franky.
The government is now in effort to develop infrastructure outside of Java in order to create evenly distributed economic growth.
Some of the prioritized infrastructure projects outside of Java are the eight segments of the Trans-Sumatra toll road, Kuala Tanjung International Airport in North Sumatra and the light rail transit (LRT) project in South Sumatra.
Investment commitments in the country surged by 167 percent from Rp 212.6 trillion in February last year to Rp 355 trillion last month, with local commitments reaching Rp 75 trillion and foreign commitments standing at Rp 280 trillion.
In the first two months of this year, meanwhile, cumulative commitments reached Rp 561 trillion.
The government has set an ambitious target of Rp 3.5 quadrillion in investment commitments for the period of 2015-2019.
Franky argued that the rising investment commitments indicated that the government’s economic stimulus packages had started to gain traction with investors. The government had issued 10 stimulus packages in the last six months to simplify doing business in the country and cut through complicated bureaucracy.
One particularly favored stimulus package program, issued by BKPM, is the three-hour licensing service in which investors with total investment of no less than Rp 1 trillion or who employ more than 1,000 workers may obtain a number of permit types in just three hours.
In February alone, seven companies with total investments of Rp 9.1 trillion used the facility, according to BKPM data.
The latest government revision on its “negative investment list”, which covers sectors where foreign ownership restrictions apply, is believed to have had boosted investment commitments by 50 percent, Franky said previously.
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