Indonesia’s investment performance has continued to trend positively, despite the recent global economic uncertainty. In turn, investment has become the main component to support economic growth, balancing out the slower exports experienced. As a result, Indonesia has continued to receive positive reviews. The current investment ratings thus reflect Indonesia’s resilience to the global financial crisis, improving government and external credit metrics, and the ability to manage domestic political challenges such as the reform agenda. These ratings are:
- Fitch Ratings (January 24th, 2020): affirmed Indonesia’s sovereign credit rating at “BBB” with a stable outlook.
- Rating and Investment Information, Inc (March 17th, 2020): affirmed sovereign credit rating of Indonesia at “BBB” with a stable outlook.
- Japan Credit Rating Agency, Ltd (January 31st, 2020): affirmed Indonesia’s foreign currency long term senior debt at “BBB” from stable outlook.
- Standard & Poor (April 17th, 2019): affirmed Indonesia’s sovereign credit rating, at “BBB” negative outlook.
- Moody’s Investor Service (February 10th, 2020): affirmed Indonesia’s foreign and local currency bond ratings at “Baa2” with a stable outlook.
In terms of geography, direct investment realisation Indonesia is still highly concentrated on the island of Java, about 53.7% of total direct investment was allocated to Java. However, the current president of Indonesia, Joko Widodo, commits to allocate no less than 63% (totalling approximately US$ 203,511 million) of the total national strategic budget, to improve the infrastructure outside the island of Java—such as building railroads, which expected to decrease the logistics costs in the outskirts and rural areas that could only be accessed by air transport.
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Following the re-election of President Joko Widodo (Jokowi) for period 2020-2024, the Ministry of National Development Planning and the National Development Planning Agency (Bappenas) announced the Medium-Term Development Plan 2020-2024 (RPJMN) in an effort to maximise and prioritise the development in five main sectors.
1. Infrastructure Development
Building infrastructures that connect large infrastructures with production areas, such as, small industries, special economic areas, tourism, paddy fields, plantations and fish embarks. Policy direction:
- Establishment of highways, airports and trans Papua roads, in support of the national food and small industries and food estate in Merauke
Connectivity to support tourism
- Palapa Ring project, in support of the use of digital technology in Small and Medium Industries (IKM) towards Go-Digital IKM
- Water resource infrastructure. The construction of reservoirs and water in the eastern region of Indonesia to support the development of Special Economic Zone Sorong and irrigation for plantations, rice fields and fish embarks
2. Human Resource Development
Ensuring the health of pregnant women, infant, toddler and children, reducing maternal-infant mortality, increasing the quality of education and vocational training, building Indonesian talent management institutions, and support for high-talented diaspora. Policy direction (health & well being development):
- Health improvements for mother and child to tackle maternal and child mortality, and improved reproductive health
- Expansion and development of basic immunisation
- Expansion of access and quality of family planning and reproductive health services
- Acceleration in the reduction of stunting by providing parenting counseling and access to clean drinking water and proper sanitation
- Strengthening the health system by reinforcing basic health services and referrals, increasing health workers’ competence and fulfilling pharmaceutical preparations and medical devices
Policy direction (TVET development):
- Industrial Cooperation based Vocational Education and Training, with an increased role and cooperation by industries
- Reformation of the execution of education and vocational training which includes:
- The alignment of curriculum, learning models and study programs
- Dual TVET, teaching factory and apprenticeship/internship
- Enhancing soft skills and foreign languages
- Entrepreneurship in schools, madrasahs and pesantren
- Apprenticeship for teachers/instructors in industry, as well as instructors/practitioners from industries
3. Encouragement in Investment
Inviting as much investment as possible to create more job opportunities, cut licensing, extortion and other investment barriers. Policy direction:
- Action plan to increase the Ease of Doing Business Ranking
- Coordination of Ease of Business and National Competitiveness Policies
- Implementation of the simplification, harmonization and synchronization of investment licensing regulations at the level of central/ministry of institutions and regions.
- Evaluation and implementation monitoring of regulations regarding Negative Investment List
- Implementation and development of the Electronic Integrated Business Licensing System Coordination of investment development policy
- Structuring of labour regulations
4. Bureaucratic Reform
Structural reforms in order to create institutions that are simpler, more rapid, faster service and granting permits, and efficient. Policy direction:
- Implementation of e-services in the sector of licensing services
- Expansion of integrated services in the licensing sector Development of an integrity zone in the licensing service unit
- Structuring in the coordination with ministries and institutions that deals with sectoral licensing
5. National Budget Plan (APBN) Allocation
Guarantees a focused and target oriented use of the National Budget Plan (APBN) in ensuring that it provides economic benefits for the Indonesian citizens, improving social welfare.
Noting the current situation of uncertainty, President Jokowi announced a revision of National Budget Plan allocation to support the medical and health sector, SMEs and other government stimulus in response to Covid-19. Despite this, Indonesia is still positive towards foreign investments, in particular the tech and digital sector.
Source: Medium-Term Development Plan 2020-2024 (RPJMN), National Budget Plan 2020-2024 (APBN)
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