New BKPM Chief Bullish On Foreign Investment
Gita Wirjawan, the new head of the Investment Coordinating Board, knows his job is not going to be easy.
Charged with attracting foreign investors to the country, Gita takes over at the board, known as the BKPM, at a time when combined foreign and domestic investment during the first 10 months declined 13.8 percent from the same period in 2008, with foreign direct investment plunging by 29 percent.
Meanwhile, foreign businesses in many sectors still complain about the problems they face with problematic government regulations and legal uncertainties. Despite this, Gita says, things are looking up.
How is the role of your organization going to change from when your predecessor ran it?
What is very important is that the BPKM has been elevated to the role of a ministry. This, I think, speaks to how serious the government is about the BPKM and its role. Having this extra seniority will help us encourage officials in other government ministries to work with us and this is going to be vital in our coordinating efforts.
We would also like to ensure the distribution of capital goes throughout the whole of Indonesia [not just Java] which may not have been such a focus earlier, and to harmonize the work of all the necessary government bodies, both central and local, which work with investors.
We often hear about big deals being signed in investment forums but they never seem to get past the memorandum of understanding stage. They don’t reach development. What’s causing these deals to fail? Is it a problem with communication?
To be honest, I think there has been enough communication about what we can promise investors. However, there hasn’t been enough clarity in respect to the underlying rules and regulations that they face when they put money into Indonesia.
The main stumbling block is not just a lack of clarity on the rules and regulations. We must also put a premium on our ability to enact and enforce some of these rules, and the degree to which we are able to fulfill our promises to investors.
To be fair, much of this lack of clarity lies beyond the BKPM, which is why the tightening of the coordination with respect to all the other institutions is key. We cannot underestimate that. We need to communicate better among ourselves.
Many of the bottlenecks are about getting land titles or building permits. To this end the “one stop shop,” or single window system, where each of the ministries will have to sign off on a project and the investor only has to go to one place to get approval, is one of the chief aims in our first 100 days.
With all of these problems, how do you promote Indonesia to foreign investors?
Actually, promoting Indonesia is not difficult. The key to this is basically selling directionality. Most people overseas, if you ask them, think Indonesia is not doing badly at the moment.
We’ve had good growth statistics this year, and we expect better things down the track. That’s what I mean about directionality - things are going to get better.
This is not spin, this is a reasonable assumption.
Do you think you will be able to reach President Bambang Susilo Yudhoyono’s target of Rp 200 trillion ($21.2 billion) of realized total investment a year? Is this figure realistic?
I think it’s realistic, but we will have to work very hard. I think it’s important to realize that this figure has items in it that are not deemed pure investment. This includes items such as consumption, fiscal spending and capital expenditure by financial institutions.
The president was really talking about investment in terms of total GDP, as a proportion of roughly 30 percent. Despite this, even if you consider the growth potential of Indonesia for the next five years, growing at 5 percent to 6 percent a year, the target will not be easy to reach. But it’s a target.
So how much foreign direct investment do you expect by the end of your term? This year we are looking around $15 billion.
It would be nice to see a realization of $25 billion to $35 billion in annual FDI.
Charged with attracting foreign investors to the country, Gita takes over at the board, known as the BKPM, at a time when combined foreign and domestic investment during the first 10 months declined 13.8 percent from the same period in 2008, with foreign direct investment plunging by 29 percent.
Meanwhile, foreign businesses in many sectors still complain about the problems they face with problematic government regulations and legal uncertainties. Despite this, Gita says, things are looking up.
How is the role of your organization going to change from when your predecessor ran it?
What is very important is that the BPKM has been elevated to the role of a ministry. This, I think, speaks to how serious the government is about the BPKM and its role. Having this extra seniority will help us encourage officials in other government ministries to work with us and this is going to be vital in our coordinating efforts.
We would also like to ensure the distribution of capital goes throughout the whole of Indonesia [not just Java] which may not have been such a focus earlier, and to harmonize the work of all the necessary government bodies, both central and local, which work with investors.
We often hear about big deals being signed in investment forums but they never seem to get past the memorandum of understanding stage. They don’t reach development. What’s causing these deals to fail? Is it a problem with communication?
To be honest, I think there has been enough communication about what we can promise investors. However, there hasn’t been enough clarity in respect to the underlying rules and regulations that they face when they put money into Indonesia.
The main stumbling block is not just a lack of clarity on the rules and regulations. We must also put a premium on our ability to enact and enforce some of these rules, and the degree to which we are able to fulfill our promises to investors.
To be fair, much of this lack of clarity lies beyond the BKPM, which is why the tightening of the coordination with respect to all the other institutions is key. We cannot underestimate that. We need to communicate better among ourselves.
Many of the bottlenecks are about getting land titles or building permits. To this end the “one stop shop,” or single window system, where each of the ministries will have to sign off on a project and the investor only has to go to one place to get approval, is one of the chief aims in our first 100 days.
With all of these problems, how do you promote Indonesia to foreign investors?
Actually, promoting Indonesia is not difficult. The key to this is basically selling directionality. Most people overseas, if you ask them, think Indonesia is not doing badly at the moment.
We’ve had good growth statistics this year, and we expect better things down the track. That’s what I mean about directionality - things are going to get better.
This is not spin, this is a reasonable assumption.
Do you think you will be able to reach President Bambang Susilo Yudhoyono’s target of Rp 200 trillion ($21.2 billion) of realized total investment a year? Is this figure realistic?
I think it’s realistic, but we will have to work very hard. I think it’s important to realize that this figure has items in it that are not deemed pure investment. This includes items such as consumption, fiscal spending and capital expenditure by financial institutions.
The president was really talking about investment in terms of total GDP, as a proportion of roughly 30 percent. Despite this, even if you consider the growth potential of Indonesia for the next five years, growing at 5 percent to 6 percent a year, the target will not be easy to reach. But it’s a target.
So how much foreign direct investment do you expect by the end of your term? This year we are looking around $15 billion.
It would be nice to see a realization of $25 billion to $35 billion in annual FDI.