And the winner is…: Regional Champions stand apart with their economic development

Early October 2011 saw the Indonesian government announce the winners of its second round of “Regional Champion” contests, with seven new provinces gaining the coveted title. The Regional Champions are provinces selected by the Indonesia Investment Coordinating Board (BKPM) for their success in promoting investment, business and economic growth.

APPRAISE: The award focuses attention on leading areas of the country, all of which have leveraged their competitive advantages to raise their levels of income and standards of living – and thus helped fulfil some of the key goals of decentralisation (see overview).

The Regional Champions 2011 awards went to Aceh, Central Java, West Kalimantan, South Sulawesi, Central Sulawesi, North Sulawesi and West Sumatra. These were chosen out of some 26 provinces initially appraised by the BKPM, with these then whittled down to a final shortlist of 10. At the same time, the BKPM ran appraisals and then awards for Best Host for One-Stop Integrated Service in Investment, with 229 regencies and 36 cities considered, from which 20 regencies and 10 cities made the final short list. From these, three regencies were finally awarded the title – Riau’s Rokan Hulu and Indragiri Hulu regencies, and South Sumatra’s Ogan Komering Illir regency – and three cities, with Rokan Hulu coming first. In the cities category, first was Parepare in South Sulawesi, then Dumai in Riau, and finally Surakarta in Central Java.

EFFECTS: Recent times have seen certain provinces jump ahead in economic development and investment. One of the winners exemplifying this was West Kalimantan, with the award serving to focus attention on this southern neighbour of East Kalimantan, which had previously been honoured, in 2010, as one of the country’s seven Regional Champions (see overview).

West Kalimantan won the award thanks to its sustained economic growth and ability to attract investors. According to Yoseph Alexander, the West Kalimantan Investment Promotion Board chief, economic growth in the province went up from 4.76% in 2009 to 6.89% in the first half of 2011, while investment grew from Rp5trn ($600m) in 2008 to Rp9trn ($1.1bn) in the same period. Investment vectors in the province have largely been in oil palm, coal, rubber and the smelting trades.

Elsewhere, South Sulawesi is another example of how Indonesia’s provinces are developing their attractiveness to business and investment. The province has produced a strategic investment plan, with first-half 2011 marking Rp2.1trn ($252m) of domestic investment injected into South Sulawesi, according to governor Syahrul Yasin Limpo. The plan also involved the establishment of one-stop shop investment services, while major investment in transport infrastructure has helped boost the ease of doing business and reduced its cost. Indeed, 2011 has proved something of a banner year for Sulawesi, with three out of its six provinces winning the Regional Champions title.

ANOTHER ACHIEVER: Aceh’s place in the winning seven is also a remarkable achievement. The province was torn by separatist conflict for many years, then suffered terribly in the 2004 tsunami. Yet the territory, now at peace and a special region with much autonomy, has come back from its times of hardship. Aid and relief programmes following the tsunami have certainly helped – September, for example, saw the opening of a major new 150-km highway in the province, part of a US-funded $430m tsunami relief package. The province has always been rich in oil and gas, while in recent years its service sector has also expanded.

West Sumatra, meanwhile, takes over in late 2011 from South Sumatra as that island’s representative among the Regional Champions. The province has managed some robust economic growth in recent years, with Statistics Indonesia figures putting GDP growth at an annual average of 5.92% between 2006 and 2010.

These seven all stand now to benefit from the BKPM’s promotion overseas, as it uses them to illustrate a point increasingly apparent – that Indonesia is very much more than just its traditional investment centres, with plenty of opportunities also available far from Jakarta.