BKPM expects higher investment this year

The Jakarta Post, Jakarta

Investment is expected to keep growing this year despite heightened political concerns during the general election, Investment Coordinating Board (BKPM) chairman Theo F. Toemion said.

Theo said on Tuesday that investment was projected to contribute between 25 percent and 28 percent of this year's gross domestic product (GDP).

He explained that the increasing stability in the macroeconomic arena and the strong rally in the stock market would encourage new investment in the country.

He declined to disclose the targeted figures for domestic and foreign direct investment this year.

Investment has been weak since the country plunged into an economic crisis in the late 1990s. This has been the result of various problems, including a lack of legal certainty, lingering labor conflicts, rampant corruption and red tape, and an ineffective and corrupt bureaucracy.

The lack of investment has resulted in the economy growing only around 4 percent over the past couple of years, which is considered insufficient to absorb the huge number of people currently unemployed.

Last year, investment only contributed around 17 percent to GDP, compared to domestic consumption which accounted for around 78 percent.

Some experts have said that in order for the economy to return to its pre-crisis growth levels of around 7 percent, investment will need to contribute around 35 percent to the economy.

But they acknowledged that boosting investment would not be an easy job as fixing the institutional problems in the country could not be done overnight.

Some predict that pre-crisis growth levels might only be achieved in the next two years as investors will only start making new investments in the second half of next year with a new government already in place.

This year, the economy is forecast to grow by around 4.8 percent.