News Summary: 19-25 April 2014

NewsfromIndonesia

Summarised by Agnes Samosir 

Red carpet for foreign investment. Government has revised Presidential Regulation No.36/2010 on Daftar Negatif Investasi/DNI (negative investment list) to open more opportunities for foreign investors. It is reported President Yudhoyono has agreed to endorse the revision anytime soon. According to head of Investment Coordination Board Mahendra Siregar, the revision is expected to facilitate investment flow more easily to the country.   The DNI highlights sectors accessible and inaccessible to foreign investors. Current revision will welcome investors to previously closed sectors such as developing 1 – 10 megawatt power plant or providing vehicle inspection service. In pharmaceutical industry, foreign investor is now allowed to have share up to 85 percent from 75 percent previously. Also, with public private partnership scheme, foreign investor is allowed to have share up to 95 percent for business in port facility service. Local business owners have criticized the policy since the revision is considered supporting more foreign investors. For instance, Vice Chairman of Indonesia Business Commerce, Hariyadi Sukamdani, said the government should only open sectors where local business owners are incapable to develop. According to him, local firms are still capable to fully develop port service facility. (Source: KONTAN Newspaper)

FDI slows amid global uncertainty. According to Indonesia’s Investment Coordination Board (BKPM) on Thursday (24/4), Indonesia saw a sharp decline in foreign direct investment in the first quarter of 2014, which was due to lagging global economic recovery. At the same time, the board believes that investors held back from investing in the country since Indonesia is in its political year and may face some political uncertainties. FDI realisation grew only 9.8 percent year-on-year, a significant plunge compared to the 25.4 percent FDI growth it posted a quarter earlier. Singapore and Japan were the two biggest investor with total investment of USD 1,281 million and USD 951.9 million, respectively. The industries that were considered most attractive were manufacturing and mining, which comprised of 50.9 percent and 24 percent of total realised FDI, respectively. Although FDI is slowing total realised investment still maintained a double-digit growth of 14.6 percent – reaching IDR 106.6 trillion, thanks to robust growth from domestic investment. In the figure, domestic investment contributed IDR 34.1 trillion, or a 25.9 percent increase in the respected quarter. In 2013, total realised investment in Indonesia reached historic high IDR 398.6 trillion, or growing 22.4 percent y-o-y. This year, however, BKPM targeted a lower 15 percent growth in investment. (Source: Jakarta Post)

Investment shifts to capital intensive industry. For the last three years, investment has been flowing to capital intensive industry with insignificant job creation. Head of Investment Coordination Board, Mahendra Siregar, said investment realization has increased in the first quarter of 2014 (IDR 106.6 trillion) compared to similar period last year (IDR 93 trillion). However, job creation is lower in 2014 (260,156) compared to 2013 (361,294). According to Mahendra, the data shows labor intensive industry in Indonesia has lost its competitiveness. He is calling for improvement in labor productivity to restore the competitiveness.  (Source: KOMPAS Newspaper).

Supreme Audit Agency appoints Rizal Djalil as its new head. Following retirement of Indonesia’s former head of Supreme Audit Agency (BPK) Hadi Poernomo, the plennary court of BPK has now appointed Rizal Djalil as Hadi’s successor. Rizal will be assigned until the appointment period ends in the coming October 19. Rizal’s background was mainly from politics. He was a former politician for National Mandate Party (PAN) and a representative in the house. Rizal, however, was recently reported to join Golkar’s organisation. Supreme Audit Agency is one of Indonesia’s high institutions. Its former head Hadi Poernomo was captured by Corruption Eradication Commission a day after its retirement was announced in BPK following an alleged tax crime revolving around his earlier position as the tax director general in the ministry of finance. (Source: Jakarta Globe, Bisnis Indonesia, Jakarta Post)

Disclaimer: The summary series aim to capture the economic and political issues that make the headlines in the Indonesian media. They do not necessarily reflect the views of The Indonesia Project and its members.