Jakarta's new FDI-driven economic agenda

This is written by the New Straits Times group managing editor Datuk Abdul Jalil Hamid.

JAKARTA: It used to take up to 923 days for investors to secure permits to develop power plants in Indonesia, an onerous process that could deter potential foreigners from investing in the populous nation.

But that is slowly changing under the presidency of Joko Widodo. Known popularly as Jokowi, the new Indonesian leader has proposed sweeping reforms to make the country more investor-friendly and less bureaucratic.

Under him, Jakarta has set up one-stop integrated service centres to expedite the approvals of a multitude of permits needed to build infrastructure projects.

Earlier this year, it cut the approval time to build ports from 923 days to just 256 days. The country’s Investment Coordinating Board, or Badan Koordinasi Penanaman Modal (BKPM), is proposing to further cut red tape and the number of building permits to expedite seaport development.

Accelerating infrastructure development and economic growth have been the hallmarks of Jokowi’s presidency and his Working Cabinet (Kabinet Kerja).

Jokowi, who took office just six months ago, had won praise for naming experienced technocrats, such as the Coordinating Minister for Economics Sofyan Djalil and Finance Minister Bambang Brodjonegoro, to key economic posts.

Foreign direct investments (FDIs) would be key to Jokowi’s economic agenda. 

This was the message that he, Vice-President Jusuf Kalla and Sofyan Djalil amplified when they met with a high-powered Malaysian business delegation last week.

The Kuala Lumpur Business Club (KLBC) delegates, eager to hear first-hand from the Indonesian leaders, were very impressed with what they heard or saw.

Sofyan, who spoke for 45 minutes at a working dinner with the 36-strong KLBC delegation on Friday, outlined his government’s economic agenda and extended a welcoming hand to the Malaysian investors to invest in his country.

“The engagement with the new Indonesian leadership is very important and timely. This has helped to cement the already close business and economic ties between Malaysia and Indonesia,” KLBC Advisory Council chairman Datuk Rohana Mahmood said.

KLBC President Tengku Datuk Zafrul Tengku Aziz said both countries should look at areas where it is easier to achieve - the low hanging fruits – in beefing up bilateral economic relations.

“These include streamlining and harmonising rules and regulations to the extent possible when it comes to capital markets,” he said. “This is important especially as Indonesia embarks on increasing spending on infrastructure.”

They should also look at tapping the right talent pool. “Both countries must look at how companies are not too restricted in getting the best talent for the ventures in the respective countries,” the CIMB group chief executive officer said.

“It has to be win-win formula. Both sides have to look at tomorrow and manage the noises of today. Reciprocity is important. Maybe they should even consider shareholding limit that is favourable for Malaysian and Indonesian companies and for Asean firms too,” he said.

The Sultan of Perak Sultan Nazrin Muizzudin Shah, who is the Royal Patron of KLBC, led the Malaysian delegation to call on Jokowi and Kalla at the presidential Istana Merdeka complex here.

Privately, Malaysian business leaders wished for some certainty in Indonesian investment policy. 

They noted that some Malaysian companies, which have invested heavily in Indonesia, had lost millions of dollars due to rules being changed midway.

The Malaysians appeared at home when they met Kalla, who cracked some jokes. 

Responding to a question, he said in jest that he was turning into a “professional vice-president”, having served two presidents. But he was quick to add: “A vice is a vice. The most important thing is for the country.”

On a serious note, he said Indonesia needed to create jobs, spur investments and develop infrastructure to sustain economic growth, seen at 5.7 per cent this year.

He also spoke of the emerging middle class in Indonesia. “There are 90 shopping malls in Jakarta alone.”