JAKARTA – Indonesia’s investment authority wants to attract more foreign investment into manufacturing and other value-added industries to wean the economy off the volatile resources sector, its chairman said.
A series of rules introduced this year that are aimed at giving the government more revenues from Indonesia’s key resource sector have deterred foreign direct investment, as has political uncertainty as Indonesians voted for a new president, who is due to take office in October.
Mr Mahendra Siregar, chairman of the Indonesia Investment Coordinating Board, told Reuters he expects foreign direct investment to grow 15 per cent this year and around 18 per cent in 2015, a slowdown from the 22 per cent growth in 2013.
Mr Siregar said he expected some of this investment to come from companies in the consumer and manufacturing sectors in several countries including Japan, South Korea and China as they had expressed interest in investing in Southeast Asia’s largest economy.
He declined to give details. Companies that have so far announced plans to invest in Indonesia include Samsung Electronics, Philippine fast food chain Jollibee Foods and Thai green tea maker Ichitan Group.
Taiwan’s Foxconn Technology Group, a major supplier for Apple, is also considering a US$1 billion (S$1.25 billion) manufacturing project in Indonesia.
“There’s no sustainability (in FDI flow) if we have to, on and on again, face the boom-and-bust growth of the resources or commodities sector,” Mr Siregar said.
“That’s why for us, it’s important to see value-added processing activities also taking place in Indonesia,” he added.
Investor sentiment has since improved after Jakarta governor Joko Widodo was elected president, but FDI growth is likely to pick up slowly as the current parliament and the government will remain seated until October, when Mr Widodo’s new administration takes over.
Mr Siregar said the investment board would recommend to the new government introducing tax incentives for foreign investors to develop new sources of energy such as geothermal, hydropower and biofuels due to the high costs.
It will also propose setting up a “one stop unit” to reduce overlapping bureaucracy and cut the time it takes to get an investment permit to 4 months from more than a year now, he added.
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