The Investment Coordinating Board (BKPM) is working toward unclogging Indonesia’s bureaucratic investment system, BKPM chairman Franky Sibarani said at a forum sponsored by Jakarta Foreign Correspondents Club on Monday.
“BKPM stands to facilitate and assist potential investors and existing investors who are having difficulties realizing their investment,” he said.
All national investment permits are now being streamlined through BKPM. Franky said that the BKPM was working on making the investment process more flexible, by shortening the processing time from two-and-a-half years to nine months and eliminating the requirement for a minimum investment value. The BKPM approved investment plans valued at Rp 320 trillion ($24 billion) this year, an increase of 13.9 percent from 2014, he added.
Another priority for BKPM, aside from investment flexibility, is what Franky referred to as “de-bottlenecking”. Companies in Indonesia have been struggling with problems such as land acquisition, tax regulations and shortages of raw materials, factors leading to slow progress and impediments to investment, Franky said.
Of 88 companies guided by BKPM through the investment process, 66 were facing major unresolved difficulties as of May, he said. The remaining 22 have reportedly worked around their problems, Franky said. That translates to a quarter of the companies under BKPM since November last year that have resolved their issues.
Franky also described the difficulties in obtaining work permits as a “big issue,” though, he did not provide any plan or solution. Under current Labor Ministry rules, a foreigner seeking to work in Indonesia is issued a six-month work permit rather than one year.
Indonesia’s economy has been slowing amid weak exports and a depreciating rupiah. The economy in the first quarter grew 4.7 percent and President Joko Widodo wants annual economic growth to return to the 7 percent pace, banking on infrastructure spending and investments this year to help improve the economy.
“There are still a lot more things to achieve, a lot more things to be done,” Franky said, referring to the goals of the Joko administration.
The government plans to increase infrastructure spending with the construction of new airports, seaports and power plants. Still, in the first half of 2015 infrastructure spending hasn’t progressed as expected, with economic growth at its slowest pace since the third quarter of 2009 and the rupiah trading at its lowest level against the dollar since 1998.
When asked about the effect of the exchange rate toward investment sentiment, Franky said investors were “still optimistic.” He said that “the condition” of the rupiah may persist until the third quarter. The rupiah traded on Tuesday at 13,333 to the dollar, bringing its decline this year to about 7 percent.
Franky said that the pace of job creation hasn’t kept up with economic growth. In 2004, every 1 percent of economic growth translated into 450,000 new jobs created. Last year, when the economy grew 5 percent, only 140,000 jobs were created for every 1 percent gain in gross domestic product.
Franky said that if Joko’s target of creating 2 million jobs per year is to be met, the economy should be growing at least 5 percent, which means that 400,000 jobs would need to be created for every 1 percent increase in GDP.
The BKPM chief said that the key in meeting this target is by having the government support local industries and raise the minimum wage. Franky, though, did not provide details on possible policy changes in these two areas.