Indonesia CBG extends an open invitation to investors

Indonesia is open for business, and central bank governor Perry Warjiyo wants the international investment community to be clear that there is a continuing story of reform. 

“Over the past five years under president Joko Widodo, there has been a lot of reform,” he says. “Now he has been re-elected we will see another five years of consistent development along those lines of reform.” 

Mr Warjiyo has been in post since 2018, having served as deputy governor since 2013. Since the election of Mr Widodo in 2014, Mr Warjiyo has been involved with plans to finance the government’s ambitious infrastructure plans. Earlier in 2019, proposals were outlined for $400bn in building projects, with about 35% of this funding expected to come from the private sector. 

“The central bank has been advising the government on how to accelerate structural reform in Indonesia,” says Mr Warjiyo. “Infrastructure in Indonesia has developed significantly over the past five years, whether that is airports, seaports, toll roads or the construction of energy infrastructure. The development of the infrastructure is attracting FDI.”  

Expanding industries 

Indonesia is looking to increase its GDP by diversifying its industries. On this topic, Mr Warjiyo says: “The utilisation of natural resources, especially in the eastern part of the country, is a growing industry. In manufacturing there is huge potential for FDI. This spans a range of industries, including automotive, garment, footwear, electronics and foods, as well as other aspects of manufacturing. The fishing industry is also expanding and will also be attracting FDI.”

The goal is to ensure investment is spread across the country and its numerous industrial sectors. Mr Widoko is keen for local authorities to become more open to receiving support from international investors, encouraging a reduction in bureaucracy and making permit application easier. The process has also been simplified so applications can now be submitted online. 

On the tourist trail 

Tourism remains a key industry in Indonesia, with most investment centred on Bali and Jakarta. However, plans are in place to develop the sector across the country, and open up more of its 17,000 islands to foreign visitors.

“Tourism is expanding. The country has ambitions to create 10 new resort destinations – the ‘10 New Balis’ project – which will see new locations developed using the model of Bali. They will be created around the country and they are attracting FDI,” says Mr Warjiyo.

The 10 New Balis project was initiated by Mr Widodo to establish more world-class resorts across the archipelago. Restrictions on visas have also been relaxed, with citizens from 169 countries now able to travel freely to the country, with the aim for Indonesia to obtain 8% of GDP from tourism by 2020. 

Overseas support 

The recent reforms have been a response to external pressures as Indonesia experienced a decline in the FDI it was receiving. During 2018, there was an 8% year-on-year decrease, blamed on China-US trade tensions and US Federal Reserve interest rates policy. But efforts to attract international financing are now coming to fruition as, after months of decline there has been an increase in FDI, which rose 9.6% in the second quarter of 2019 on first-quarter numbers.

There are now 18 industries eligible for a tax holiday in Indonesia, the length of which varies by industry and size of the investment. Mr Warjiyo has ambitions for further international investment to keep the country competitive. “Indonesia is progressing well, thanks to structural reform," he says. "There have been developments to create a better investment climate by establishing tax incentives that offer a friendly environment for FDI. I invite foreign investors to invest in Indonesia, and to enjoy the beneficial climate we have created for them.”