The government’s top investment official on Tuesday appealed to the Indonesian people not to fall under the spell of a counter-productive economic nationalism, saying foreign investment was needed to develop the economy.
“Nationalism gets defined in a better way when we can start seeing capital moving into this country from outside,” said Gita Wirjawan, the chairman of the Investment Coordinating Board (BKPM).
“[Foreign investors should start] partnerships with local entrepreneurs so local entrepreneurs can start crawling first and then walking.”
Speaking at the Jakarta Foreign Correspondents Club, Gita defended the government’s plan to ease restrictions on foreign investment in certain sectors, which has sparked a backlash from some.
President Susilo Bambang Yudhoyono has set an ambitious target for his second term: boosting combined domestic and foreign investment to Rp 2,000 trillion ($216 billion) a year to achieve economic growth of at least 7 percent over the next five years.
To meet this goal, the president has pledged to cut red tape and prevent overlapping regulations from slowing the development of infrastructure.
“People have voiced a certain nationalistic passion but the key is to make sure that nationalism gets expressed in the right, proportional manner,” said Gita, a former country manager for US bank JPMorgan Chase.
“Nationalism doesn’t get defined by closing the doors ... We’ve seen basically two years of nothing in terms of the capital flows needed to support the build-up [of the economy].”
The Ministry of Communication and Information Technology is among those that have opposed easing restrictions on foreign investment, known as the “negative investment list.”
The ministry has insisted, for example, that the telecommunications-tower sector remain 100 percent in Indonesian hands.
But Gita said the industry requires capital expenditure of $7 billion to $8 billion annually, an amount requiring deeper pockets than those of domestic players.
“There’s no way for Indonesian entrepreneurs to be able to [supply this finance],” Gita said, adding that the banking system was still not providing enough liquidity to meet the needs of local businesses.
He added that the revised negative investment list, which he expected to be finalized by the end of the month, would set a more investor-friendly tone and eliminate any ad-hoc policies that had harmed the investment climate in the past.
“The list will emphasize the hierarchy of laws so that overlapping regulations will be cleared up to the max,” Gita said.