With investment this year forecast to slump, the investment body will focus on investors prioritizing infrastructure, energy and food.
Investment Coordinating Board (BKPM) chairman M. Lutfi said Tuesday that amid economic hard times, investment should be prioritized on medium and long-term projects, in "infrastructure, energy and food" sectors.
Luky Eko Wuryanto, BKPM deputy chairman, said there would always be an increasing demand for food despite the crisis, and as for energy, the world trend is leaning towards alternative energy sources, while infrastructure is needed to support both sectors.
The BKPM did not reveal if the prioritizing of these sectors would mean the government making available incentives for investors.
According to the BKPM 2009 roadmap however, the three sectors are crucial for Indonesia's economy. Infrastructure and energy can both create multiplier economic effects, while food largely contributes to the inflation rate.
The report stated investment on food crops and plantations will remain lucrative as commodity prices are relatively stable, with a trend towards greater stability. Moreover, Indonesia had 100.8 million hectares of land available for farming in 2007, more than 50 percent of its 188 million hectares total land area.
The book also stated that Indonesia had 600 million ton of oil reserves or 0.4 percent of world oil reserves, with a production capacity of 47.4 million tons annually, enough to sustain domestic and international demand if enough investment was mobilized to maximize production.
Investment on infrastructure in the country is still relatively low and it is needed to increase food production and energy exploration.
In the period from 2004-2005, the needs for investment in infrastructure reached US$145 billion, but the state budget only allocated 17 percent of the needed amount.
The board is focusing on rice, corn, soy, sugarcane, crude palm oil (CPO), and cocoa commodities for the food crops sector.
The energy sector is focusing on oil, gas and coal as well as alternative energy sources, while the infrastructure sector is focusing on electricity, ports, irrigation, and public roads.
The government has said it will provide incentives to the infrastructure, energy and food sectors. It has allocated a stimulus of Rp 10.2 trillion for infrastructure, Rp 3.5 trillion for cooking oil, Rp 1.4 trillion for an electricity tariff discounts and Rp 2.8 trillion for diesel subsidies.
Lutfi said investment would grow between 10.7 percent and 11.2 percent this year, although declining from 20.5 percent growth in 2008, but still a relatively high figure given adverse global economic conditions.
He said investors would be interested in the electricity sector, roads, telecommunications and the energy sector, which would all yield significant returns.
Last year, Indonesia secured Rp 20.36 trillion and US$14.87 billion in domestic investment and foreign investment, respectively. Domestic investment dropped 41.6 percent from a year earlier, while foreign investment rose 43.8 percent.
Lutfi said local investors might use foreign companies to invest in Indonesia. "If you ask me is it good or not? It is good (for investment)."
Through investment last year, Indonesia managed to create 313,316 new jobs, according to BKPM.
Edy Putra Irawady, the deputy to the coordinating minister for the economy, in charge of industry and trade, said domestic investment dropped last year because local investors were having a hard time to find financing.
"Local investors also do not have the courage to invest in long-term projects. Very different from foreign investors," he said.
He added that if BKPM wanted to attract more investment, it should make a "clean and clear investment model". (fmb)
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