The Center of Reform on Economics (CORE) Indonesia assesses that the\ntarget for Gross Fixed Capital Formation (GFCF) or national investment\ngrowth of 6.5%-7% in 2027 is still achievable. However, the government\nneeds to accelerate investment realisation amidst a slowing momentum\nthat has become apparent throughout this year.<\/p>\n
CORE Indonesia Economist Yusuf Rendy Manilet stated that the lower\nbound of the target is still realistic. However, to reach the upper\nbound, the pace of investment must grow higher than current\nconditions.<\/p>\n
\u201cI see the lower bound as still quite realistic, but the upper bound\nwill be difficult to achieve without accelerating investment. Currently,\nGFCF is still growing at 5.96% annually. It is indeed the second largest\ncontributor to growth after household consumption, but to reach 6.5%-7%\nin 2027, the pace of investment must increase faster than it is now,\u201d\nYusuf told Kontan on Tuesday (30\/6\/2026).<\/p>\n
\u201cThe investment value is indeed still large, but the momentum is\nstarting to slow. Yet the 2027 GFCF target requires an acceleration of\ninvestment,\u201d he said.<\/p>\n
Yusuf assessed that the problem with investment in Indonesia is not\nsolely the size of the incoming investment value, but also its\neffectiveness in driving economic growth. Currently, the ratio of GFCF\nto gross domestic product (GDP) is still around 28%, while Indonesia\u2019s\nIncremental Capital Output Ratio (ICOR) remains in the range of 5-6.<\/p>\n
\u201cThis means that every additional unit of investment has not yet\nproduced optimal economic growth. What is needed is not just more\nprojects, but more productive investment through regulatory\nimprovements, business certainty, and lower logistics costs,\u201d he\nexplained.<\/p>\n
Regarding the role of the Daya Anagata Nusantara Investment\nManagement Agency (Danantara), Yusuf assessed that the institution has\nthe potential to become one of the drivers of investment. However, its\nimpact on GFCF growth is expected to only become visible towards the end\nof 2026 to 2027, given that most projects are still in their early\nstages.<\/p>\n
He also cautioned against equating the value of investment\ncommitments with investment realisation. According to Yusuf, a portion\nof the funds managed by Danantara is still being used for the\nrestructuring of state-owned enterprise (SOE) assets, so not all of it\nis immediately recorded as gross fixed capital formation.<\/p>\n
\u201cThe announced investment value is indeed large, but not all of it is\ndirectly recorded as GFCF. Some is used for restructuring SOE assets,\nwhich is important for governance but does not immediately create new\ninvestment,\u201d he said.<\/p>\n
Furthermore, Yusuf assessed that Danantara\u2019s success is not only\nmeasured by the amount of funds disbursed, but also by its ability to\nattract private sector participation.<\/p>\n
\u201cIf investment is still dominated by government and SOE funds, the\nimpact on the economy will be limited. Its success is actually measured\nby how much private investment comes in, or crowding in. That will\ndetermine whether Danantara truly becomes an investment catalyst or\nmerely a new source of state financing,\u201d he said.<\/p>\n
From a sectoral perspective, Yusuf estimates that investment in 2027\nwill still be supported by downstream processing projects and\ninfrastructure development. The base metals industry is expected to\nremain the main contributor, followed by downstream oil and gas\nprojects, bioethanol, bioavtur, dimethyl ether (DME), and\nwaste-to-energy processing.<\/p>\n
On the other hand, investment in the digital economy and renewable\nenergy is also expected to continue increasing, particularly through the\nconstruction of data centres. However, its contribution is considered\nnot yet as large as investment in the industrial downstream sector.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/2027-investment-target-of-7-danantara-cannot-yet-be-the-booster-1782827446", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }