Foreign direct investment (FDI) into Indonesia surged in the first quarter of this year, with major opportunities emerging in the country’s raw materials sector, according to Indonesian Investment Minister Bahlil Lahadalia.
Speaking at the Indonesia Investment Forum in London, Minister Lahadalia outlined the steps the country has taken to simplify regulations to improve the investment environment, including the Omnibus Law.
“FDI jumped more than 60 per cent in Q1 of this year,” the Minister said. “We are the largest recipient of FDI in Southeast Asia.”
In a wide-ranging presentation, the Minister also discussed Indonesia’s ambition to shift from an exporter of raw materials used in battery production, to a manufacturer of batteries themselves – with major investment opportunities resulting as the global energy transition gathers pace.
“25 per cent of global nickel reserves are in Indonesia,” the Minister said. “We want investment into Indonesia to develop this industry.”
The Forum also heard from Perry Warjiyo, Governor of Bank Indonesia, who shared his assessment of the country’s positive economic outlook via a video address, while UK Minister for Investment, Dominic Johnson, espoused the need for stronger and more open economic ties between Indonesia and the UK, calling for “a laser-like focus in cutting barriers to trade and investment.”
Desra Percaya, Indonesian Ambassador to the UK, also addressed the Forum, urging greater cooperation between countries to navigate a challenging global economy. “The only option for us is collaboration,” he said.
One of the key themes explored during the Forum was Indonesia’s potential as a driver of the green transition. In a panel titled ‘Unleashing Indonesia’s sustainable growth potential’, Mallika Ishwaran, Chief Economist at Shell, noted the rapid pace of Indonesia’s growth.
“By 2050, we expect Indonesia’s economy to be 10 times bigger than it was in 2000,” she said. However, this growth must be sustainable, with the energy transition offering a chance to “rally resources to generate opportunities for the country.”
The transition can be used “to address inequality and underdevelopment,” Ishwaran added.
As Minister Lahadalia mentioned, Indonesia’s high reserves of nickel offer a key opportunity, given the role that the electric vehicle (EV) sector will play in the shift to lower carbon economies. This is something Toto Nugroho, President Director, Indonesia Battery Corporation, emphasised during the discussion.
“Nickel is used in 60 to 65 per cent of the entire EV batteries in the world. We don’t want to miss the opportunity to be part of the EV ecosystem,” Nugroho said. However, this will require external investment. “To create a battery producing industry, the investment needed is around US$15bn,” he suggested.
For Lord Vaizey, Chair of the UK-ASEAN Business Council, the UK can be a key partner for Indonesia as it seeks to develop sustainably. “We’ve reduced emissions by half during a period in which growth has doubled,” he said, highlighting the UK’s “depth and breadth of experience that we hope will be constructive and beneficial when we engage with Indonesia.”
Closer partnership between Indonesia and the UK was something Anindya Novyan Bakrie, Chief Executive Officer and President Director of Bakrie and Brothers, agreed with. Welcoming the MoU signed between the two countries on the day of the Forum, Novyan highlighted the UK’s financial markets and strength in innovation as key assets. “This MoU talks about investment, trade, life sciences and defence,” he said. “We need these partnerships on finance and tech.”
Yet with the opportunities in Indonesia clear, another question the Forum addressed was how to capitalise on them. This was the focus of a panel exploring how to accelerate investment into Southeast Asia’s largest economy.
A key development has been Indonesia’s so-called ‘Omnibus Law’, which seeks to simplify and streamline regulatory environment in the country. “This has created much better investment in Indonesia,” Nurul Ichwan, Deputy Minister for Investment Promotion of the Ministry of Investment, told the Forum.
Indonesia has also developed extensive project reports to help potential investors, the Deputy Minister said. “We have 47 projects that are available for investment right now, with pre-feasibility studies already done.”
This is something that Rino Donosepoetro, Vice Chairman for ASEAN, Standard Chartered Bank, said will be of particular value to investors. “These are among the most advanced and informative promotional packages of projects that I’ve seen,” he said.
For Donosepoetro, who also serves as Chairman of the British Chamber of Commerce (BritCham) Indonesia, another way to accelerate investment into the country is better financing structures.
“There are US$450bn of opportunities in the pipeline right now in Indonesia, in terms of energy projects,” he said. “But there is a need for significant financing.”
Another key factor for investors is stability, something that Indonesia offers both politically and economically. Farida Peranginangin, Chief of London Bank Indonesia Representative Office, spoke on the country’s positive economic outlook, citing the recent IMF assessment of Indonesia as “a bright spot” in the global economy.
“In Q1, growth was above five per cent, and we are quite sure growth will be above five per cent in 2022,” she said. Inflation has also been kept broadly under control, with Peranginangin predicting it will return to within the Central Bank’s 3.1 per cent target “in Q1 next year.”
Chaired by Asia House Chief Executive Michael Lawrence and supported by the Indonesian Embassy to the UK, Bank Indonesia, and the Indonesia Investment Promotion Centre, the Forum gave investors the chance to hear from key figures at the heart of Indonesia’s economy, and learn more about the opportunities emerging in this dynamic country.
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