Indonesia in 'Big Push' to Open Up Economy to More Investment

Indonesian Trade Minister on Economy, Foreign Investment
  • Investment rules to be rationalized: Trade Minister Lembong
  • Infrastructure spending to push 2015 growth to 5.2%, he says

Indonesia is intent on opening up previously closed sectors of the economy to foreign capital, the trade minister said, as the government prepares to announce changes to its investment guidelines.

Greater foreign investment and increased government spending on infrastructure will compensate for weaker export performance and drive economic growth in Indonesia to as fast as 5.2 percent this year, Minister Tom Lembong said in a Bloomberg Television interview on Tuesday.

President Joko Widodo is holding a cabinet meeting later on Wednesday to discuss revisions to the so-called negative investment list, a document that determines which sectors of Southeast Asia’s largest economy are open to foreign capital. The government plans to announce the final changes after the meeting, said Azhar Lubis, deputy chairman for investment supervision at the Indonesia Investment Coordinating Board.

“We are opening up and rationalizing our investment regime,” said Lembong, a Harvard graduate who joined the government as part of a cabinet reshuffle in August. “It’s a big push. We had fallen behind from where we should be.“

Since taking office in October 2014, the president, known as Jokowi, has sought to increase infrastructure spending and implement bureaucratic reforms to rejuvenate an economy hurt by sliding commodity prices. After a shaky start characterized by policy u-turns and protectionist policies, there are signs growth is starting to rebound. The rupiah outperformed its emerging-market peers in the four months through January, while economic growth beat analyst estimates in the final three months of 2015 to reach 5.04 percent.

Lembong said he expected expansion this year to be between 5.1 and 5.2 percent, up from 4.79 percent in 2015, which was the slowest annual rate of expansion since 2009. Foreign direct investment rose 7 percent in the final three months of 2015 from the previous quarter. Investment was up 3 percent the full year.

Evolving Indonesia - Jokowi's Mission

“We are seeing financial stabilization now,” Lembong said during the interview at his office in central Jakarta. “Our infrastructure program is now snowballing. That is the engine of growth.”

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