Is Indonesia resilient enough to face the ‘perfect storm’?

Currently, planet earth is witnessing three kinds of crisis -  economy, energy, and food security, as many countries in the world are still struggling to recover from the Covid-19 pandemic. In addition, the geopolitical conflicts between Ukraine and Russia have further disrupted the global food and energy supply chains.

This disruption in the global supply chain, sluggish post-pandemic economic recovery, and uncertainties about what the future holds have forced developed countries to tighten their foreign direct investment belt to emerging economies, including Indonesia. 

However, KADIN believes that Indonesia remains to present itself as the most attractive foreign direct investment destination in the long run for the following four reasons.

First - is the natural state of Indonesia. With a population of over 270 million, Indonesia remains the biggest market in Southeast Asia. We are blessed with abundant natural resources, i.e., 30% of the world's nickel reserves are in Indonesia. Finally, we are also blessed with pristine nature, ready to be developed as a world-class ecotourism destination.  

Second - Indonesia's macroeconomic fundamentals remain robust. This is evident as we saw a 5,01% YoY economic growth in the first quarter of 2022 and 5,44% in the second quarter of 2022; we are on track to see a 5,4% growth by the end of 2022. This over 5,00% growth figure is projected to continue in the coming years. 

Third - the country has undergone structural reforms to increase the ease of doing business in Indonesia, which created a conducive and attractive investment climate. To boost investment in the country, the government has even produced incentives and policies for companies, such as tax holidays/reductions, tax allowance, and preferential and free import tariffs for capital goods.

This strategy has been fruitful as we saw USD 31 Bn. of foreign direct investments in 2021, a 50% growth from 2018.

Fourth - Indonesia possesses peaceful and stable domestic politics. The stability and certainties of a given country are part of the main drivers for investment destinations as it provides them a sense of confidence and security for their investments. 

As we’re approaching the 2024 presidential election, I want to remind everyone that there needs to be a peaceful and collaborative race. So instead of doing whatever it takes to win the race for the throne, we should foster a spirit of cooperation for the greater good, which is the betterment of Indonesia.