Indonesia needs $90 billion to $100 billion of private sector investment from 2010-14 if the country is to achieve its target of 7 percent annual growth, the chairman of the Investment Coordinating Board said on Thursday.
Speaking at a summit on Indonesia organized by The Economist, Gita Wirjawan said the country needed to spend a total of $140 billion to $150 billion over the five-year period to upgrade its aging infrastructure. But the government was only able to finance around $50 billion to $60 billion, meaning the rest would have to come from the private sector, he said.
Vice President Boediono, speaking at the same event, also emphasized the need for more private sector investment.
“To accelerate growth from 6 percent to 7 percent, we need improvement of infrastructure, roads and railways without delay,” Boediono said. “This investment will not be possible without investment from the private sector as the government does not have anywhere near enough money.”
“We have worked hard to reduce the hurdles to investment in infrastructure in particular,” Boediono added. “Thus, we have, by necessity, a rather ambitious infrastructure-development plan for the next five years.”
Gita said the board, also known as BKPM, had simplified the business-licensing process to attract investors.
“We can now issue licences faster,” he said. “It previously took 30 to 40 days and now we can do it within seven days and sometimes as fast as five hours.”
But despite the improvements in licensing, Gita acknowledged that there were still other obstacles to investment, such as acquiring land and getting building permits.
But the biggest obstacle in improving private investment in Indonesia was the fact that the country still was not on the radar screen of many international investors, he said.
“The selling points are easy. Indonesia has a population of 235 million, making it the fourth-largest country in the world. It’s the largest Muslim country in the world and the third-largest democracy,” Gita said.
“But nobody knows this. We’ve got to make sure that people know more about Indonesia other than the demonstrations, terrorism, tsunamis, floods and earthquakes that they read about in newspapers. That needs to be changed.”
Darrell R. Johnson, a lawyer at Indonesian law firm Soewito Suhardiman Eddymurthy Kardono, said he was impressed by the country’s economic development, but it needed to improve its legal system. “Even 5 percent economic growth without much improvement in the legal system causes worries for foreign investors,” he said.