Thomas Lembong, Chairman, Indonesia Investment Coordinating Board (BKPM): Interview

Interview: Thomas Lembong

How can investment processes be improved?

THOMAS LEMBONG: Since September 2015, the government has issued 12 economic policy packages to improve the investment climate. I believe that there will be more policies issued to deregulate and modernise our regulations. At BKPM, we have implemented three key reforms to assist investors: the one-stop service office, the three-hour licensing provision and the direct construction facility. We will strengthen these services and simplify more procedures. The president set out an ambitious target to increase Indonesia’s rank in the World Bank’s ease of doing business index. Every year, we review and seek to improve these indicators. It is a national effort that involves ministries, government institutions and local governments.

What can Indonesia do to boost its foreign direct investment (FDI) inflows?

LEMBONG: The current administration leads our economic reforms based on two fundamental principles: openness and competition. On that basis, in its first year, the government revised the negative list to be more open to FDI in 35 industrial sectors including logistics, the digital economy, energy, pharmaceuticals, the film industry and tourism, and we will continue to open our economy. We are also focusing on attracting more FDI in several priority areas: manufacturing, infrastructure (including power plants), agriculture, the maritime sector, tourism, special economic zones (SEZs) and industrial estates.

How would you assess the main priorities for improving the business environment?

LEMBONG: After issuing economic policy packages, we acknowledge that the supporting regulations are still catching up, and implementation is still lagging behind. Therefore, we are accelerating the issuance of related regulations and ensuring their implementation. We are also strengthening synergies among government institutions. An end-to-end service for investors should be provided at both the central and regional levels. For example, we coordinated with ministries and local governments in implementing the three-hour licensing service and the direct construction facility. Recently, the central government revoked more than 3000 regional regulations to avoid duplication and inefficiency.

Which policies can BKPM use to contribute to increasing economic growth?

LEMBONG: For the 2015-19 period, we set a total investment target amounting to Rp3471trn ($253.4bn). This is a very optimistic goal, yet it is achievable. We will take several measures to accomplish this. First, we will accelerate the realisation of strategic investment projects and facilitate the expansion of existing companies. We will continue with and expand ongoing reforms, including simplifying more procedures and strengthening investment services. We will also pursue bilateral investment treaties and support trade agreements with Indonesia’s strategic partners. Moreover, we will ensure the implementation of economic policy packages, including endorsing the issuance of relevant regulations.

What sectors can help expand the proportion of investment being made outside of Java?

LEMBONG: The two sectors that can be most useful for expanding investment outside Java are the manufacturing industry and tourism. For manufacturing, each region should be developed based upon its competitive advantages. SEZs and industrial estates are expected to serve as foundations for companies to grow and create multiplier effects in the regions. Seven of the eight existing SEZs in Indonesia are located outside of Java and were developed for specific sectors. We will have SEZs in Sumatra for processing palm oil, rubber, fertiliser and petrochemicals.