Investment prospect for 2020: Target more realistic
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: Prospek investasi 2020: Target lebih realistis
15 April 2020
By: Muhammad Wildan
This year will be a ‘dark year’ for investments. The global uncertainty due to the COVID-19 pandemic forces investors to wait and see. From the economic indicators issued recently, the government is also more realistic.
Firstly, the Finance Ministry forecasts investments or gross fixed capital formation (PMTB) to only grow 1.3% (year-on-year/yoy) this year.
The greatest pressure will occur in the second and the third quarters of 2020 where the PMTB will decrease by 0.3% (yoy) and 1% (yoy). In the first quarter of 2020, PMTB is predicted to still grow 3% (yoy).
Secondly, the business world activity survey of the first quarter of 2020, published by Bank Indonesia (BI), shows that the net weighted balance (SBT) from investments is only 2.61%, which is lower than the fourth and the first quarters of 2019 where SBT from investments reached 9.89% and 9.62% respectively.
Thirdly, lower investments can also be seen from the lower import growth, especially of capital goods.
Data from the Customs and Excise Directorate General shows that, in March 2020, the number of capital goods import was lower by 22.8% (yoy) compared to same month last year.
This condition continues the capital goods import decline in January and February 2020, which decreased by 5.26% (yoy) and 16.44% (yoy) respectively.
Seemingly ignoring the decline, the Investment Coordinating Board (BKPM) is still optimistic about realising a target of Rp886 trillion in 2020.
Various efforts are implemented, such as facilitating process, promoting, and asking SOEs (State-Owned Enterprises) for assistance.
Indef Executive Director Tauhid Ahmad said that BKP should lower the investment target and be realistic and follow the steps of the government. According to him, realising the target is difficult.
“When the government was correcting the growth [target], [the target of] ministries or institutions must also be corrected so that their target was not too high. 50% of the target is already great,” Tauhid said on Tuesday (14/4).
He added that currently there were no foreign investor investing. All corporations are focusing on maintaining their business amid the economic pressure.
Coordinating Minister for Maritime Affairs and Investment Luhut B. Pandjaitan confirmed the lack of investments in Indonesia. However, he affirmed that investments were only postponed, not cancelled.
Until now, Luhut said that his agency had not planned to lower the investment target. “No investors said that they would cancel investing in Indonesia,” he said.
State-owned
BKPM realises that achieving the target is difficult.
Hence, BKPM Head Bahlil Lahadalia had asked support from state-owned companies to increase domestic investment (PMDN) amid lower foreign investment (PMA).
CORE Indonesia Executive Director Mohammad Faisal said that asking SOEs to invest amid the pandemic had caused a dilemma.
On one hand, it increases the burden of the country, but BKPM does not have any better option. Investments are required to maintain the economic cycle, especially in the manufacturing sector.
“However, it is impossible to expect private investments in a situation like this. So, SOEs need to act according to their capacity,” Faisal said.
SOEs can increase their investment in the country, but they must keep in mind that there are certain sectors that must be prioritised.
For example, the health and the information technology sectors are crucial amid the Covid-19 pandemic and the large-scale social distancing (PSBB).
The capability of the SOEs must also be considered. Do not let SOEs with high debt to equity invest.
