From May 20th to June 3rd, an Indonesian delegation comprising senior officials from the Ministry of Investment/BKPM and the Ministry of National Development Planning/BAPPENAS embarked on a two-week study and networking mission across Europe. This mission, facilitated by ARISE+ Indonesia, was led by the Deputy Minister for Investment Promotion, BKPM, Mr Nurul Ichwan. The delegation met with representatives of the European Commission, various financial institutions, pioneering high-tech companies and world-leading sectoral ecosystems.
The agenda included discussions on the EU's new flagship financing initiatives and instruments, the Global Gateway and the European Fund for Sustainable Development Plus (EFSD+) and insightful exchanges on smart cities, urban mobility, renewable energy, healthcare, agribusiness, and the green economy.
This initiative was part of ARISE+ Indonesia's commitment to supporting BKPM in developing the EU-Indonesia Investment Attraction Plan. The plan is pivotal in realising Indonesia's investment agenda and targets, thereby contributing to the nation's broader vision.
Upon the mission's successful conclusion, we were granted the opportunity to engage in a fruitful discussion with Mr Nurul Ichwan. We explored the key insights garnered from the study mission and discussed potential strategies for fostering fruitful partnerships between Indonesia and the European Union (EU) to bolster Foreign Direct Investment (FDI) in Indonesia.
The following is an excerpt from that enlightening interview.
Q: Can you provide an overview of Indonesia's investment policy direction for the periods 2020-2024 and 2025-2029? What are the key objectives and priorities outlined in these policies?
NI: Indonesia's investment policy direction for the periods 2020-2024 and 2025-2029 aligns with its ambitious goal of becoming a developed country with the world's fifth-largest GDP by 2045. To accomplish this vision, the government has launched an economic transformation agenda that emphasises sustainable policies and the creation of an investment-friendly climate. This serves as the core pillar and driving force for post-pandemic economic recovery.
During the 2020-2024 period, Indonesia has set a Foreign Direct Investment (FDI) target of IDR 4,983.2 trillion, representing an impressive 47.3% increase compared to the previous five years. This year, under the guidance of our President, we have established an ambitious investment target of IDR 1,400 trillion, signifying our unwavering commitment to growth and development. Achieving these investment goals requires extraordinary efforts and a clear investment policy direction, enabling us to unlock new opportunities and propel our nation forward.
To steer Indonesia's economic transformation, six pivotal strategies have been identified. These strategies encompass promoting a green and low-carbon economy, enhancing economic productivity, embracing digital transformation, fostering domestic economic integration, prioritising human resource development, and executing the bold relocation of the national capital. In addition, priority sectors have been established to attract investments, including labour-intensive industries, export-oriented ventures, renewable energy projects, infrastructure development, the digital economy, and value-added industries. These strategies will pave the way for sustainable and inclusive growth.
Our investment policy prioritises key aspects that drive investment realisation, both in terms of quantity and quality. This involves active engagement in promotion and facilitation activities, as well as meticulous preparation of investment proposals and maps that outline strategic and priority projects, ready to be presented to potential investors. Additionally, we are committed to optimising business licensing through the streamlined OSS (Online Single Submission) system, which guarantees convenience and fosters an attractive and conducive investment climate. In our unwavering dedication to investors, we are resolved to address investment problems through comprehensive end-to-end facilitation and support, ensuring that challenges are swiftly resolved.
These comprehensive investment policies and strategies highlight Indonesia's commitment to driving economic transformation, attracting investments, and fostering sustainable development for the benefit of its people and the global economy.
Q: Recently, you led an Indonesian delegation to visit several European countries to build contacts and study innovations in urban mobility, renewable energy, sustainable cities, and healthcare. What would you consider as the key takeaways from this mission?
NI: During the mission, our Indonesian delegation had the opportunity to engage directly with the European Commission and various financing institutions, gaining valuable insight into a range of investment project financing structures. We saw considerable enthusiasm from our European partners towards ready-to-launch sustainable development projects, regardless of whether they are small, medium or large scale. This highlighted an exciting array of opportunities for Indonesia, opportunities we promptly brought to light through presenting the Investment Opportunities Map, a project curated by the Ministry of Investment as well as the list of national infrastructure projects from the Ministry of National Development Planning for their further consideration.
One of the unique experiences from this visit was seeing the EU's successful implementation of the triple helix model - a system that integrates education, research, and industry. This model has proven to be an effective conduit for innovation across various sectors. We believe that innovation is the driving force for enhancing economic productivity and propelling growth in developed nations. In the EU, we observed that this model often starts small, grows organically from the bottom up, and even emerges in response to crises. We are eager to foster close cooperation with our partners in the European Union to replicate a similar model suitably tailored to harness Indonesia's unique advantages.
Q: How do you believe these findings can contribute to Indonesia's investment promotion efforts and development in these sectors?
NI: Our mission has offered crucial insights that we believe can directly propel Indonesia's investment promotion endeavours. Throughout our journey, we engaged with several EU companies operating in the biotech, agricultural technology, and renewable energy sectors that demonstrated keen interest and tangible plans to invest in Indonesia. We plan to capitalise on this interest promptly by providing the necessary information, data, and contacts, even facilitating their visit to Indonesia in the near future.
Both the European Union and several financing institutions have expressed a keen desire to expand their investment portfolios in Indonesia. As an initial step, we presented them with a selection of promising projects aligned with their target sectors. We're confident that this dialogue will be sustained until collaborations come to fruition. Interestingly, one of the Dutch financing institutions plans to visit Jakarta in July 2023 to meet with relevant stakeholders for more detailed discussions.
Another significant learning point was the successful implementation of the Emission Trading System (ETS) in the European Union, which has evolved and matured since its inception in 2005. Considering Indonesia launched its ETS for the coal-fired power plant subsector early in 2023, and plans to gradually extend it to other subsectors, this offers us a valuable benchmark. Currently, the Indonesian Government, under the coordination of the Coordinating Ministry of Maritime and Investment (Kemenkomarves), is drafting a carbon trading policy slated for release in mid-2023. The European Commission has generously extended an invitation for further discussions with Indonesia. This is an opportunity we should seize, as the EU stands as a pioneer and the oldest carbon trading organisation worldwide.
Q: Looking ahead, do you see the potential for future partnerships between Indonesia and the European Union (EU) to foster increased Foreign Direct Investment (FDI), particularly in the areas of urban mobility, renewable energy, sustainable cities, and healthcare? If so, what areas of collaboration or joint initiatives do you envision that could drive investment in these sectors?
NI: We recognise that the EU currently stands as a global nexus for green technology and sustainable development, offering a plethora of solutions, innovations, and cutting-edge technologies designed to enhance the quality of life. They have also demonstrated a successful track record of implementing best practices. Considering the distinct strengths of both Indonesia and the EU, along with the pressing significance and urgency of environmental concerns, we believe accelerating the energy transition in Indonesia should be a key focus of our collaborative efforts. This involves increasing investment in renewable energy generation and technology, fostering the development of an electric vehicle ecosystem, and securing financing support through a variety of schemes provided by the EU and its member states.
With regard to direct investment, we intend to reactivate the EU Desk at the Ministry of Investment/BKPM. Together with ARISE+ Indonesia and in collaboration with Indonesia Investment Promotion Center (IIPC) London, we can compile a shortlist and initiate dialogues with a significant number of prospective EU companies. Further exploration can be facilitated through targeted meetings and forums within the EU or investment missions to Indonesia supported by the EU. We also envision the EU Desk serving as a conduit for linking sustainable projects in Indonesia with various EU financing instruments, including those within the framework of the Global Gateway, EFSD+ (European Fund for Sustainable Development Plus), and JETP (Just Energy Transition Partnership).
Q: From your interactions and observations while engaging with potential investors in Europe, what are the key factors or requirements that European investors typically seek or need to confidently invest in Indonesia?
NI: It's essential to acknowledge the pivotal role of communication and information provision. Many European investors, as we've found, lack a deep understanding of the Indonesian landscape. Hence, they're highly motivated to gather as much information as possible. This not only helps them avoid business risks but also assures them of committing to projects that are truly ready for investment.
Investors' preferences may vary, however, there are certain key factors or requirements they typically consider: firstly, market potential and accessibility play a crucial role. For instance, European investors are particularly attracted to the size and growth potential of the Indonesian market. They often evaluate elements such as purchasing power, consumer trends, and the market demand for their specific products or services. Moreover, they see the value in accessing not only domestic but also regional markets, as it allows for a broader scope of market penetration.
Secondly, they pay attention to the overall Business Environment. European investors appreciate an environment that is conducive to business. They look for streamlined administration, efficient bureaucracy, and clear, unambiguous regulations. A robust, transparent, and predictable legal and regulatory framework is another important aspect they seek.
Thirdly, the availability of skilled labour is a pivotal aspect, particularly for facilitating innovative and high-tech industrial activities.
Next, political and economic stability is critical for investors. In fact, Indonesia's political stability and consistent economic growth are quite appealing to European investors.
The presence of investment incentives is another factor they consider, such as tax breaks, tax holidays, import duties, and other incentive packages.
Lastly, European investors place a significant emphasis on infrastructure development. Infrastructure greatly influences the efficiency of supply chains, reduces logistical costs, and notably enhances connectivity.
Q: In order to attract EU investors, what strategies or approaches do you believe can be developed to effectively promote investment in Indonesia that would resonate with EU investors and encourage them to consider Indonesia as an attractive investment destination?
NI: Various strategies can be employed to attract EU investors and encourage them to view Indonesia as a lucrative investment hub. The most critical of these efforts involve disseminating relevant information through collaborations with various entities such as Indonesian Embassies in EU countries, business associations, and think tanks, highlighting some important key points, including: firstly, Indonesia's substantial and robust market potential, featuring a rising middle class, stable economic growth and favourable demographics.
Secondly, it is also essential to underscore Indonesia's commitment to improving the ease of doing business, bolstering regulatory transparency, and strengthening investor protection, including providing comprehensive information on various investment incentives.
Thirdly, we should focus on Indonesia's infrastructure development plans and projects, including those in the transport, energy, and telecommunications sectors. We can underscore the government's commitment to enhancing domestic connectivity, refining logistics networks for supply chains, and widening market access.
Fourthly, we should provide information on Indonesia's commitment to sustainability and green initiatives. This includes our efforts towards mitigating climate change and developing renewable energy, illustrating the government's support for environmentally sustainable business practices.
Fifthly, we should highlight the availability of local labour as well. EU investors are usually quite interested in exploring partnership opportunities with local companies or Indonesian State-Owned Enterprises.
Next, we should identify several sectors that are attractive to EU investors. These could include areas such as manufacturing, renewable energy, technology, tourism, and healthcare.
Another effective strategy would be the organisation of business forums, small business groups, seminars, conferences, and direct investment missions and visits to Indonesia.
Finally, building trust and providing facilitation from the information provision stage to the operational phase in Indonesia is key. This way, investors feel supported and guided throughout their investment journey in Indonesia.
Q: ARISE+ Indonesia is currently working with your teams on an Indonesia-EU Investment Attraction Plan. What is your hope and expectation when it comes to the EU’s involvement and support in implementing this attraction plan, once it is finalised?
NI: As I mentioned earlier, our hope is that this collaboration will yield tangible outcomes, particularly an increase in the realisation of high-quality investments from the EU into Indonesia. Naturally, this process takes time, involving various stages from analysing priority sectors, shortlisting potential companies, conducting further exploration with these companies, and finally reaching financial closure. We hope for continued EU cooperation and support throughout this process, a significant aspect of which includes the reactivation of the EU Desk.
Additionally, we hope for the EU to facilitate communication with shortlisted potential companies, the broader business community, and financing institutions within the EU, continuing the efforts initiated through the recent visit to Europe that ARISE+ Indonesia facilitated. Establishing lines of communication is one of our significant challenges when it comes to approaching companies and partners within the EU.
To conclude, I would like to extend our gratitude to ARISE+ Indonesia for their invaluable assistance in the development of the Indonesia-EU Investment Attraction Plan, the organisation of the mission to Europe, and their pivotal role in facilitating connections with EU investors. Their unwavering support not only contributes to the realisation of our investment agenda and target but also significantly advances Indonesia's vision.
This collaboration embodies a strategic partnership that is instrumental in fostering economic growth, propelling innovation, and building a sustainable future for Indonesia. Ultimately, these endeavours serve to enhance the lives of our people, contributing to a brighter future for all Indonesians. We are hopeful and excited about what lies ahead and sincerely appreciate the continued commitment and support of ARISE+ Indonesia.