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Investment

Investment, Export & Government Spending Improve in Q3

Based on data from Statistics Indonesia (BPS), investment growth in Indonesia (gross fixed capital formation, GFCF) reached 7.11 percent (y/y), the highest level in four years. This improvement may very well be related to the improving ranking of Indonesia in the World Bank’s Ease of Doing Business, where Southeast Asia’s largest economy jumped from 91st to 72nd this year. Moreover, the government has been eager to improve the investment climate through deregulation.

Another positive matter is that Indonesia’s import and export performance improved markedly. Indonesia’s exports surged 17.27 percent (y/y), while its imports surged 15.09 percent (y/y) up to the third quarter of 2017. These are great figures considering the nation’s import and export experienced contractions over the past three years. The improving export performance is primarily attributed to rising commodity prices (specifically prices of coal and crude palm oil). In terms of export volumes, however, there has not been a significant improvement, hence global demand for Indonesian commodities has not strengthened significantly yet.

Indonesia

Meanwhile, government spending rebounded by expanding 3.46 percent (y/y) in the third quarter of 2017, accelerating after a near 2 percent contraction in Q2-2017. The Indonesian government has particularly been trying to boost spending on infrastructure development across the Archipelago as this would cause the multiplier effect and encourage structural economic and social growth. Moreover, the availability of high-quality infrastructure would also attract more private investment.

The key to unlock significantly accelerating economic growth is a recovery in household consumption (household consumption accounts for slightly over half of Indonesia’s GDP). According to a Bank Indonesia official it is particularly the lower middle class segment that is reluctant to spend their money.

Source: Indonesia Investments

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BKPM to standardize investment procedures, forms

The Investment Coordinating Board (BKPM) plans to create one-size-fits-all standards to better serve potential investors across the country, in response to complaints about different registration forms and procedures in various regional administrations.

Investment Coordinating Board (BKPM) head Thomas “Tom” Lembong (left) listens to Trade Minister Enggartiasto Lukita during the BKPM National Coordination Meeting in Nusa Dua, Bali, on Friday. (Antara/Nyoman Budhiana)

Investment Coordinating Board (BKPM) head Thomas “Tom” Lembong (left) listens to Trade Minister Enggartiasto Lukita during the BKPM National Coordination Meeting in Nusa Dua, Bali, on Friday. (Antara/Nyoman Budhiana)

BKPM head Thomas “Tom” Lembong told 531 representatives of regional investment agencies (DPM PTSP) during the BKPM National Coordination Meeting in Nusa Dua, Bali, that the board’s reform watchword this year was “Kis”, an abbreviation of Coordination, Integration and Standardization in Indonesian.

“Investors who plan to invest in several regions are frustrated dealing with all of the different standards […] We need to coordinate more to have one vision; integrate all data from all agencies on one database and standardize every different format of forms and procedures,” he said on Friday.

Under the current administration, thousands of business regulations have been annulled to simplify the registration, construction and running of businesses. The reforms have largely worked well at the central government level, but not at the regional level where business people report dozens of different forms and licenses to be completed before starting business.

President Joko “Jokowi” Widodo, who attended the event, urged the regional investment agencies to report bothersome bylaws to the BKPM, so that the central government could revoke them faster.

 

 

Source: The Jakarta Post

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