Tito Summa Siahaan – Investment in Indonesia reached a record high in 2013, exceeding the government's own target but the pace of growth is likely to slow down this year amid a tighter monetary policy.
Investment totaled Rp 398.6 trillion ($33 billion), up 27 percent from 2012 and higher than the government's forecast of Rp 390.3 trillion, according to data from the Investment Coordinating Board (BKPM) released in Jakarta on Tuesday.
Indonesia beat the forecast thanks to higher-than-expected domestic investment, which reached Rp 128.2 trillion, a 39 percent increase.
Foreign direct investment soared 22 percent to Rp 270.4 trillion but was short of the targeted Rp 272.6 trillion.
The agency has set a growth target of 15 percent next year, according to BKPM chairman Mahendra Siregar. "Investment next year will be around Rp 456 trillion," he said.
Mahendra said that the 2014 target signified a realistic adjustment after years of strong growth. "After periods of high growth, it is normal for the trend to flatten," he added.
Mahendra also dismissed concerns that this year's presidential election would damp the mood of investors.
Politics often pop up in discussions with investors but never to the point that it becomes a reason to abandon investment plans, he said. Additionally, Mahendra argued that investors are getting accustomed to the country's political process.
President Susilo Bambang Yudhoyono's second five-year term ends in November, and presidential elections will be held in July.
Mahendra said that growth in investment will be supported by the government programs to add value to the country's mineral commodities and palm oil. From both types of commodities, BKPM has approved investment plans worth Rp 190 trillion.
Suryo Bambang Sulisto, the chairman of Indonesian Chamber of Commerce and Industry (Kadin), said that strong growth in domestic investments indicated rising confidence and maturity from domestic investors. Still, Suryo believes conditions this year would not be as good.
The central bank last year raised its key interest rates in a bid to control inflation and prop up the rupiah's depreciation against the US dollar. Higher borrowing costs in Southeast Asia's biggest economy could curb demand for goods ranging from cars and motorcycles to homes and computers.
"Our primary concern is financing. With the government tightening monetary policy, we expect getting funding would be more difficult,"Suryo added.