Kadin urges more investment and stronger MSMEs beyond Java
Investment equity cannot rely solely on government spending; it requires the involvement of the business sector to connect micro, small, and medium enterprises (UMKM) with broader industries and markets.
30 Okt 2026 07:14 WIB · Ekonomi & Bisnis
KOMPAS/PRIYOMBODO
JAKARTA, KOMPAS — The Indonesian Chamber of Commerce and Industry (Kadin) is advocating for the equitable distribution of investment and the strengthening of micro, small, and medium enterprises (MSMEs) outside of Java to enhance regional economic circulation. This initiative is deemed crucial to ensure that economic growth is not concentrated in specific areas, but also creates quality jobs and boosts the competitiveness of national businesses.
The Chairman of Kadin Indonesia, Anindya Novyan Bakrie, stated that the disparity in investment growth between Java and regions outside Java is one of the challenges that needs to be addressed.
“We can understand that initially there is a need to tighten our belts so that we can start with efficiency before adopting a productive approach,” Anindya stated during his remarks at the National Leadership Meeting (Rapimnas) of Kadin 2026 in Jakarta on Thursday (29/10/2026).
The government, he continued, has recently provided guidance to address the issue in order to create more opportunities for regional economic activities.
According to data on foreign direct investment (FDI) and domestic investment, the value of investments in Java increased by 14 percent, rising from IDR 225.6 trillion in the third quarter of 2025 to IDR 265.8 trillion in the third quarter of 2026. In contrast, investments outside Java grew by only 2.2 percent, from IDR 257.1 trillion to IDR 271.6 trillion during the same period.
Input from regional Kadin officials highlights the importance of ensuring that the benefits of economic growth reach all areas of Indonesia. The limited fiscal capacity of local governments poses a challenge in stimulating economic activity, with approximately 90 percent of local governments operating with low fiscal capacity and relying on transfers from the central government.
Key points of concern include a 24.6 percent reduction in transfers to regions, accompanied by a 69.5 percent decrease in regional capital expenditures. As a result, economic growth outside of Java has contracted by 7.48 percent.
According to Anindya, increasing investment outside of Java should be part of a strategy to strengthen the people’s economy. The equitable distribution of investment cannot rely solely on government spending; it also requires the private sector’s role in connecting micro, small, and medium enterprises (UMKM) with broader industries and markets.
On the other hand, Indonesia has the opportunity to enhance the added value of domestic products by engaging in global supply chains. He noted that around 77 global brands, including Airbus, Tesla, and Nike, have sourced components from Indonesia.
“Our task is to enhance that component and boost sales. Last year, we (Indonesia) exported approximately $282.9 billion, marking a 6.15 percent increase compared to the previous year,” Anindya stated.
This opportunity must be accompanied by improvements in competitiveness, production capacity, and the involvement of MSMEs in the industrial supply chain. Anindya emphasized that the ambition to position Indonesia in the global market must go hand in hand with strengthening grassroots businesses and creating quality jobs.
“It’s impossible for a people-oriented economy and Indonesia to become global without MSMEs moving up the ranks and creating quality jobs,” he said.
To achieve this, the Indonesian Chamber of Commerce and Industry (Kadin) is promoting a partnership model that connects businesses from villages with processing industries and global markets. This model includes core-plasma partnerships, industrial supplier development, closed-loop supply chains, production, distribution, and retail partnerships, and local vendor development in industrial areas.
Kadin also presented three key recommendations. First, to establish a buffer to address the crisis. This is deemed essential for maintaining business cash flow, regional fiscal capacity, and household purchasing power. Such efforts aim to ensure the sustainability of small enterprises while also supporting industries that absorb their production.
Second, ensuring the availability of raw materials for small-scale businesses. Third, ensuring business certainty for Indonesia’s global reach.
5D Strategy
To support this recommendation, Kadin has formulated a 5D strategy that delineates the roles of the government, state-owned enterprises (BUMN), and the private sector in strengthening the economy.
The first strategy is fiscal discipline and decentralization. The government is urged to keep the budget deficit within safe limits, specifically a maximum of 3 percent of gross domestic product (GDP), while also ensuring timely payment obligations, including tax refunds.
Second, deregulation through simplification and harmonization of overlapping regulations to strengthen legal certainty for the business world.
Third, debottlenecking or breaking down logistical, licensing, and raw material barriers to allow for a smoother flow of goods, services, and investment.
Fourth, Danantara is positioned as an enabler that facilitates private investment opportunities in priority projects. Its involvement is expected to attract private investment rather than replace the role of the private sector.
Fifth, strengthen private sector support to upgrade MSMEs. MSMEs are connected to the industrial supply chain. This can be done through business aggregators, closed-loop People’s Business Credit (KUR) schemes, and business matching between MSMEs and potential buyers.
Decreased
The Minister of Investment and Downstream Industry/Head of the Investment Coordinating Board (BKPM) and CEO of Daya Anagata Nusantara (Danantara), Rosan Perkasa Roeslani, stated that the success of micro, small, and medium enterprises (UMKM) should not be measured solely by the number of business actors. More importantly, it is their ability to enhance capacity and scale their businesses to move up to the next level.
“I want the number of MSMEs in Indonesia to decrease. The fewer, the better. If they remain MSMEs, when will they graduate to a higher level? I don’t take pride in being told that we have many MSME entrepreneurs. Yes, we have many, but that number should decrease as they move up,” Rosan stated.
According to Rosan, large business owners affiliated with Kadin have a responsibility to support small and medium enterprises (SMEs), particularly those in regional areas, to help them grow and connect with industrial supply chains. Kadin is strategically positioned to fulfill this role due to its organizational network that extends down to the district and city levels.
“The Chamber of Commerce has influence down to the district and city levels. It can certainly serve as a bridge or connector to ensure that the economy in the regions, cities, districts, and provinces continues to grow,” said Rosan.
The Ministry of Investment and Downstream Industry has facilitated partnerships with approximately 1,000 small and medium-sized enterprises (SMEs) across various regions, with a total value of around Rp 20 trillion. This collaboration aims to expand SMEs’ access to markets, investments, and greater business opportunities.
Rosan emphasized that strengthening small and medium enterprises (UMKM) must go hand in hand with enhancing investment realization. He noted that quality investment is not solely defined by the amount of capital injected but also by its ability to create quality jobs, improve human resource capacity, and promote the transfer of knowledge and technology.
He explained that investment has different characteristics than capital market investment. Direct investment, or foreign direct investment (FDI), is a long-term commitment because it requires the construction of production facilities, factories, and smelters, whose operations can last for decades.
According to data from the Ministry of Investment and Downstream Industry, the realized investment during the two years of President Prabowo Subianto’s administration, from the fourth quarter of 2024 to the third quarter of 2026, reached IDR 3,923.2 trillion, creating 5.48 million jobs.
“(The investment figures) are not MoUs or agreements. They are real figures, 100 percent accountable,” he said.
From January to September 2026, investment realization reached Rp 1,539.2 trillion, reflecting a year-on-year growth of 7.3 percent. The investment target for 2026 is set at Rp 2,041.3 trillion, meaning that by September 2026, the realization target has been achieved at 75.4 percent.
Additionally, Rosan noted that the contribution of investments in the downstream sector has also increased. While it accounted for about 25 percent of total investments in 2024, this figure is expected to rise to 31 percent by 2026. In fact, by the third quarter of 2026, the contribution of downstream investments is projected to reach 34 percent.
Interestingly, about 78 percent of downstream investment is located outside Java, particularly concentrated in Sulawesi and North Maluku. According to Rosan, this situation indicates that the development of processing industries has the potential to expand economic activities and create new growth centers beyond Java.
Rosan continued that this increase not only generates foreign exchange but also creates jobs and strengthens Indonesia’s position in the global supply chain. Therefore, the involvement of SMEs as suppliers of goods and services for the processing industry needs to be further expanded.
Strengthen business partnerships
Strengthening the national economy cannot rely solely on the government or state-owned enterprises (BUMN). The private sector, including national entrepreneurs and local SMEs, must play a crucial role in investment development.
Rosan dismissed the notion that Danantara was established to usurp the role of the business sector. On the contrary, Danantara is expected to serve as a partner that enhances private sector involvement in various strategic projects.
One example is the waste-to-energy program. In this program, Danantara encourages technology providers, including foreign ones, to partner with local companies.
Through this partnership, domestic companies are expected to gain knowledge and technology transfer while enhancing their capacity to undertake large-scale projects.
“The role of Danantara is to strengthen the economy together. Indonesia’s economic pie, the business landscape in Indonesia, is growing increasingly over time,” said Rosan.
Nevertheless, he acknowledged that there is still work to be done to improve the investment climate, particularly in terms of transparency, governance, accountability, and business certainty. The government, including Danantara, must continue to enhance productivity and efficiency to ensure that investments yield optimal benefits for the economy.
Writer:
Aguido Adri, Dimas Waraditya NugrahaEditor:
FX Laksana Agung Saputra