The Investment Coordinating Board (BKPM) claimed that it had solved a number of problems hampering investment worth around US$99 billion thanks partly to its program to remove bottlenecks, a component of its current attempts to boost investment and spur growth. The problems settled are mainly connected to the misuse of permits, land acquisitions, opposition from locals, raw materials, export bans and cooperation contracts, data from the board show.
Since these issues have been settled, investments involving 22 companies, in fields ranging from sugar processing and power generation to pharmaceuticals and plantations, may proceed to the next phase to further realize their investments, according to Azhar Lubis, BKPM's deputy director for investment monitoring and implementation. Azhar said that out of the total figure, around $30 billion might be realized throughout 2015, contributing to the government's full-year target of Rp 519.5 trillion ($39.35 billion).
"As some investments have already been done with permits, they can soon commence development of their facilities and also import machines, thus these projects can be included in the investment calculation for this year," he told reporters after a discussion on investment at his office.
The issues solved as of May are only a part of several obstacles getting in the way of investments, totaling to $230 trillion and covering 88 companies, which the board has carried out since late last year. The realization of these projects will be timely as the government relies on investment, the biggest driver of economic expansion after domestic consumption, to generate growth as exports have been slowing down.
In the first quarter, realized investments amounted to Rp 124.6 trillion, up 16.9 percent from the past year. However, foreign direct investment, which represents 68 percent of overall investment, rose by only 9.8 percent on a yearly basis to Rp 72 trillion, much lower than the 25 percent surge registered in the previous quarter.
Atma Jaya University economist A. Prasetyantoko said the board's program to remove some of the bottlenecks was a good way to tackle major problems in investments but it was insufficient. Prasetyantoko said the program should be accompanied by other measures to enhance the entire investment climate, such as improving infrastructure.
"The removing of bottlenecks touches more administrative issues. So this must be followed by overcoming more fundamental problems. The combination of both is much needed at present," he said on the sidelines of the discussion.
Under the administration of President Joko "Jokowi" Widodo, the board has rolled out some efforts to reduce obstacles to investment, including the application of One-Stop Integrated Services (PTSP) and the bottleneck removal program. Indonesia, Southeast Asia's biggest economy, is in dire need of reforms as it ranks 114th out of 189 nations in the World Bank's Doing Business Report. The global finance body put Indonesia in 155th place in terms of "setting up a business" and 153rd place in the category of "dealing with construction permits".