Despite the global economic downturn, the estimated realized direct investment in Indonesia may still reach double-digits this year spurred by incentives and the stimulus packages designed by the government, the Investment Coordinating Board (BKPM) says.
“Investment might grow by double digits, at between 10 and 11 percent with (the planned) incentives, stimulus packages and simplification,” BKPM chairman M. Lutfi said in a discussion at the Regional Representatives Council (DPD) Monday.
Lutfi said investment last year grew by about 15.5 percent from 2007. Indonesia secured US$17 billion in investment last year, the highest in Southeast Asia, leaving Singapore behind with $12 billion, he said.
The government is providing about Rp 12.5 trillion of stimulus in the form of waived value added tax to help industries coping with the global economic slowdown. The amount will be increased by Rp 38 trillion later in the year, taken from undisbursed funds transferred on from the 2008 state budget.
Analysts have said exports and investment will be the hardest hit by the global economic downturn.
Lutfi said these stimulus measures would provide some leeway for businesses to make investments. The stimulus will only be given to businesses engaging in infrastructure, the energy sector and manufacturing.
He said in addition to waived value added tax, a good investment climate would also help support investment in the country. “However, what’s most important is the government’s commitment to make the country (an economic hub) as a half-processed goods producer.”
However private sector business leaders said BPKM was too optimistic in expecting investment to grow by between 10 percent and 11 percent amid the adverse global economic conditions.
“It seems it is unrealistic to expect private investment (to reach) such a high growth target.
Even government’s investment might not be able to reach the target considering slow spending, and foreign investment will reduce due to the (global financial) crisis,” said Bambang Soesatyo, head of the fiscal and monetary committee at the Indonesian Chamber of Commerce and Industry (Kadin).
He said the stimulus would only raise the production capacity of domestic industries slightly, but was still far too inadequate to create new investment.
“There are many obstacles for local investors. Interest rates are still high and liquidity is still dried up,” he added.
Bambang also said it would be a difficult task for the government to raise people’s purchasing power amid the global economic slowdown.
He added that it will be useless if businesses raise their production capacity but people are gradually losing their purchasing power.
Indonesia’s economy is about 70 percent driven by domestic consumption, according to the government. Investment only accounts for about 15 percent of economic growth.
The government is still expecting growth of between 4.5 and 5.5 percent this year, down from the estimated 6.1 percent in 2008.
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