This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Bisnis Indonesia - Penanaman modal asing 81 proyek ‘dilelang’ ke China
15 May 2024
By Jessica G. Soehandoko
Bisnis, Jakarta – China remains a vital source of capital for Indonesia. The investment authority is currently tendering 81 projects across diverse business sectors to Chinese investors, who have consistently contributed to foreign direct investment in Indonesia.
The 81 projects are included on the list of Regional Investment Potentials that encompasses various sectors, including economic zones, real estate, and tourism.
In detail, there are currently 14 projects in the agro-industry sector, 2 in the renewable energy sector, 39 in the industry sector, 9 in the infrastructure sector, 4 in the industrial estate and real estate sector, and 13 in the tourism sector.
The total investment required for the 81 projects that will be distributed across the 34 provinces in Indonesia reaches Rp239 trillion.
Investment Ministry/Investment Coordination Board Investment Cooperation Deputy Riyatno highlighted that China has consistently been a pivotal investor in Indonesia, continuously making significant contributions.
Therefore, partnership between both countries needs to be strengthened. One of the solutions is by offering these 81 projects to Chinese investors.
“There are currently 81 projects across various sectors awaiting offers. These sectors include manufacturing, infrastructure, food, agriculture, tourism, industrial estate, and renewable energy,” he said at the Indonesia-China Investment Promotion event on Tuesday (14/5).
In the tourism sector, the investment opportunities offered to investors from China include Lake Toba, Borobudur, Labuan Bajo, Mandalika, and Likupan.
The government is also offering various facilities to smooth out capital flow from the country. A fiscal incentive in the form of an income tax discount is also still offered.
Additionally, the Investment Ministry will oversee the entire investment process. This includes managing the exploration stage of investment plans, offering consulting and permit facilitation services, and facilitating communication with relevant parties.
“We are welcoming players from China to communicate and explore,” he stated.
Besides the 81 projects, the government is also offering investment opportunities in renewable energy, natural resource downstreaming, and Nusantara Capital City (IKN) development.
Policymakers have high hopes for receiving investment from China, and for good reason. China is the largest contributor of investment to Indonesia, making their partnership particularly strong.
At the end of last year at the 3rd Belt and Road Summit, Indonesia obtained plenty investment commitments, especially at the Indonesia-China business forum.
The investment commitment value is not small as it reaches US$13.7 billion. Moreover, Indonesia also has potential to secure investment worth US$29 billion.
This brings a breath of fresh air to the national economy, which desperately needs foreign direct investment to boost the gross domestic product amid economic uncertainty.
However, realising the investment commitments from China is not easy. China also urgently needs capital to revitalise its economy, which is under pressure from a property crisis and weakening consumption.
Furthermore, China needs to relax its policies to secure capital flow and prevent it from going to other countries. Xi Jinping's administration is also becoming more foreign investor-friendly by prioritising private companies in the development of various sectors.
Another challenge that must be focused on is domestic policies that are often unsynchronised, especially among the central government, regional governments, ministries, and institutions.
Director General of the Department of Asian Affairs of the Ministry of Commerce Wang Liping has positively responded to the offers from the investment authority.
According to him, China is committed to continuously making Indonesia one of its strategic investment destinations, particularly in the manufacturing sector.
Problems
However, investors from China face challenges that need attention from policymakers, particularly regarding the complicated regulations in Indonesia.
Liping added that one of the most frequently reported problems is the difficulty in understanding the regulations governing the investment ecosystem, including the policies of both the central government and regional governments.
“In the last few years, Chinese investors are increasingly enthusiastic about investing in Indonesia. However, they often find it difficult to understand the local investment policies,” he explained.
Therefore, the governments of both countries need to expand their activities that bring together investors from Indonesia and China. This is meant to explore the investment partnership so that it can be mutually beneficial.
Therefore, domestic businesses find it relatively easier to comprehend all investment aspects, including permits, land procurement, and employment.
“To receive sufficient and effective information, a communication channel is required for companies in both countries to deepen their partnership,” he added.
He added that the sectors that are currently the prima donna for Chinese investors were energy, mining, financial service, automotive, health, and green economy.
Therefore, the Indonesian government is suggested to focus on investment proposals in those sectors.
Centre of Reform on Economics (Core) Indonesia Executive Director Mohammad Faisal stated that China’s opportunity to expand its capital in Indonesia was wide open.
The country is currently receiving a surplus of foreign investment and trade, so there is an abundance of capital that must be expanded to other countries. “This is why China’s economy is developing rapidly. Not only in Indonesia, but also in other countries, such as Africa, Latin America, and Asia,” he stated.
Faisal added that the government would experience a significant influx of capital after the leadership transition following the 2024 elections.
