Blunted Weapons of Investment
There was a startling statement from Deputy Minister of Investment and Downstreaming Todotua Pasaribu last week. The Deputy Head of BKPM (Investment Coordinating Board) candidly revealed that Rp1,500 trillion worth of investment failed to enter Indonesia in 2024. This potential investment figure is clearly enormous, considering that actual investment realisation in the same year was only marginally different, at approximately Rp1,714 trillion.
Several factors caused these investment commitments and potential investments to fail to materialise, including complicated licensing procedures and overlapping policies. The Deputy Minister did not specifically mention illegal levies and thuggery as contributing factors. However, analysts are convinced that the 'terror' of these thugs is equally effective at blunting the 'bullets' of investment.
The failure to capture Rp1,500 trillion in investment commitments is clearly a devastating blow. This reality stands in stark contrast to the grand ambition of achieving 8 per cent economic growth by 2029, as reaching that growth target would require at least Rp7,000 trillion in investment over the next four years. This means the country must be capable of attracting an average of approximately Rp2,000 trillion in investment per year starting from 2025.
The question is: how could this country fail to capture such enormous potential investment worth thousands of trillions of rupiah in 2024? What caused it? Have not various regulations and laws supposedly created 'in the interest of investors' already been produced? Why have the bullets supposedly so effective at attracting investment in reality remained blunted?
Let us examine them one by one. Before Deputy Minister Todotua identified the causes of the failure to capture investment commitments and potential in 2024, the government had actually already disclosed similar problems, and they were all the same. They had also deployed a number of strategies to ensure investment could flow in freely, but all these 'bullets' remained blunted.
The omnibus law weapon, or the Job Creation Law, for instance. In Indonesia, this legislation was discussed and initiated during the administration of the 7th President, Joko Widodo (Jokowi). The legislation aimed to simplify regulations and encourage investment. On 5 October 2020, Law Number 11 of 2020 on Job Creation was enacted following rapid and controversial deliberations.
Several important points were regulated under this law, namely the simplification of investment licensing processes, changes to wage calculation formulae deemed more pro-business, and others. However, in November 2021, the Constitutional Court declared the Job Creation Law conditionally unconstitutional because its deliberation process did not comply with established rules and did not meet transparency requirements. The Court then gave the government and lawmakers two years to rectify the law so that what was 'unconstitutional' could become 'constitutional'.
In 2022, President Jokowi issued Government Regulation in Lieu of Law Number 2 of 2022 to replace the Job Creation Law that had been declared conditionally unconstitutional. In March 2023, the House of Representatives then formally approved this regulation, converting it into law. So rather than amending the law, it was replaced with a government regulation that metamorphosed into a law.
Unfortunately, the omnibus law polemic was considered to have actually hindered investment from entering Indonesia. The Job Creation Law proved ineffective. The regulation was created in violation of proper procedures. Consequently, the law was challenged before the Constitutional Court and had to be revised. This created legal uncertainty for investors. Rather than facilitating investment as originally intended, it instead created new complications.
Another effort intended to facilitate investment but which also yielded no concrete results was the establishment of the Illegal Levies Eradication Task Force (Satgas Saber Pungli). This task force was formed in October 2016 through Presidential Regulation Number 87 of 2016. Its purpose was to smooth the flow of domestic investment.
The task force was expected to be capable of eradicating illegal levy practices at both central and regional levels, which had long discouraged business investment in Indonesia.
Illegal levies frequently become a monster disrupting investment. Establishing businesses in the regions is difficult because various parties often demand additional payments. There are invariably numerous under-the-table transactions both when starting and running a business. This situation makes the cost of opening businesses in the regions considerably higher. Worse still, many regional governments fail to take firm action against those engaging in illegal levies.
Consequently, the task force produced no results. Illegal levies continued to run rampant, and even whilst the task force had not yet been disbanded, such practices were being conducted openly by officials of the Cilegon Chamber of Commerce in Banten. The local chamber leadership allegedly engaged in intimidation and coerced PT Chengda Engineering Co Ltd to secure project allocations worth Rp5 trillion without going through a tender process.
The task force has now been disbanded by President Prabowo Subianto through Presidential Regulation Number 49 of 2025 on the Revocation of Presidential Regulation Number 87 of 2016. The task force's existence was deemed no longer effective and therefore warranted dissolution.
Another bullet intended to smooth investment flow but which also remains blunted is the investment licensing system known as OSS (Online Single Submission), an electronically integrated business licensing system. OSS was first launched in 2018 with the aim of accelerating and simplifying business and investment licensing processes in Indonesia.
However, the OSS system has not worked significantly. The system, promised as a 'one-stop shop', has not fully resolved licensing obstacles on the ground. OSS was touted as a high-value reformist initiative. In reality, however, the system remains held hostage by old practices reluctant to change. The high confidence that a digitalisation system would automatically resolve bureaucratic problems has proven to be far from reality.
Without process simplification, institutional integration, and reform of officials' conduct, even the most sophisticated system will be paralysed in the hands of structures unwilling to change. If the government is serious about making OSS an engine of economic growth, what is needed is not merely a digital platform but a comprehensive overhaul of licensing governance from upstream to downstream.
Ultimately, without changes in mindset, work patterns, and integrity-based operational approaches, the bullets of investment will remain blunted. As long as the ecosystem for rent-seekers to thrive remains solid, one should not hold out too much hope that thousands of trillions of rupiah in investment will be captured.
Several factors caused these investment commitments and potential investments to fail to materialise, including complicated licensing procedures and overlapping policies. The Deputy Minister did not specifically mention illegal levies and thuggery as contributing factors. However, analysts are convinced that the 'terror' of these thugs is equally effective at blunting the 'bullets' of investment.
The failure to capture Rp1,500 trillion in investment commitments is clearly a devastating blow. This reality stands in stark contrast to the grand ambition of achieving 8 per cent economic growth by 2029, as reaching that growth target would require at least Rp7,000 trillion in investment over the next four years. This means the country must be capable of attracting an average of approximately Rp2,000 trillion in investment per year starting from 2025.
The question is: how could this country fail to capture such enormous potential investment worth thousands of trillions of rupiah in 2024? What caused it? Have not various regulations and laws supposedly created 'in the interest of investors' already been produced? Why have the bullets supposedly so effective at attracting investment in reality remained blunted?
Let us examine them one by one. Before Deputy Minister Todotua identified the causes of the failure to capture investment commitments and potential in 2024, the government had actually already disclosed similar problems, and they were all the same. They had also deployed a number of strategies to ensure investment could flow in freely, but all these 'bullets' remained blunted.
The omnibus law weapon, or the Job Creation Law, for instance. In Indonesia, this legislation was discussed and initiated during the administration of the 7th President, Joko Widodo (Jokowi). The legislation aimed to simplify regulations and encourage investment. On 5 October 2020, Law Number 11 of 2020 on Job Creation was enacted following rapid and controversial deliberations.
Several important points were regulated under this law, namely the simplification of investment licensing processes, changes to wage calculation formulae deemed more pro-business, and others. However, in November 2021, the Constitutional Court declared the Job Creation Law conditionally unconstitutional because its deliberation process did not comply with established rules and did not meet transparency requirements. The Court then gave the government and lawmakers two years to rectify the law so that what was 'unconstitutional' could become 'constitutional'.
In 2022, President Jokowi issued Government Regulation in Lieu of Law Number 2 of 2022 to replace the Job Creation Law that had been declared conditionally unconstitutional. In March 2023, the House of Representatives then formally approved this regulation, converting it into law. So rather than amending the law, it was replaced with a government regulation that metamorphosed into a law.
Unfortunately, the omnibus law polemic was considered to have actually hindered investment from entering Indonesia. The Job Creation Law proved ineffective. The regulation was created in violation of proper procedures. Consequently, the law was challenged before the Constitutional Court and had to be revised. This created legal uncertainty for investors. Rather than facilitating investment as originally intended, it instead created new complications.
Another effort intended to facilitate investment but which also yielded no concrete results was the establishment of the Illegal Levies Eradication Task Force (Satgas Saber Pungli). This task force was formed in October 2016 through Presidential Regulation Number 87 of 2016. Its purpose was to smooth the flow of domestic investment.
The task force was expected to be capable of eradicating illegal levy practices at both central and regional levels, which had long discouraged business investment in Indonesia.
Illegal levies frequently become a monster disrupting investment. Establishing businesses in the regions is difficult because various parties often demand additional payments. There are invariably numerous under-the-table transactions both when starting and running a business. This situation makes the cost of opening businesses in the regions considerably higher. Worse still, many regional governments fail to take firm action against those engaging in illegal levies.
Consequently, the task force produced no results. Illegal levies continued to run rampant, and even whilst the task force had not yet been disbanded, such practices were being conducted openly by officials of the Cilegon Chamber of Commerce in Banten. The local chamber leadership allegedly engaged in intimidation and coerced PT Chengda Engineering Co Ltd to secure project allocations worth Rp5 trillion without going through a tender process.
The task force has now been disbanded by President Prabowo Subianto through Presidential Regulation Number 49 of 2025 on the Revocation of Presidential Regulation Number 87 of 2016. The task force's existence was deemed no longer effective and therefore warranted dissolution.
Another bullet intended to smooth investment flow but which also remains blunted is the investment licensing system known as OSS (Online Single Submission), an electronically integrated business licensing system. OSS was first launched in 2018 with the aim of accelerating and simplifying business and investment licensing processes in Indonesia.
However, the OSS system has not worked significantly. The system, promised as a 'one-stop shop', has not fully resolved licensing obstacles on the ground. OSS was touted as a high-value reformist initiative. In reality, however, the system remains held hostage by old practices reluctant to change. The high confidence that a digitalisation system would automatically resolve bureaucratic problems has proven to be far from reality.
Without process simplification, institutional integration, and reform of officials' conduct, even the most sophisticated system will be paralysed in the hands of structures unwilling to change. If the government is serious about making OSS an engine of economic growth, what is needed is not merely a digital platform but a comprehensive overhaul of licensing governance from upstream to downstream.
Ultimately, without changes in mindset, work patterns, and integrity-based operational approaches, the bullets of investment will remain blunted. As long as the ecosystem for rent-seekers to thrive remains solid, one should not hold out too much hope that thousands of trillions of rupiah in investment will be captured.