Jakarta – Legal uncertainties have hindered foreign investors from investing in Indonesia, especially in new or green field projects, Bank Indonesia (BI) senior deputy governor Destry Damayanti said in Jakarta on Friday.
License procurement processes were more difficult for investors to measure compared to funding or workforce issues, she added. Many permit application processes have no set timeframes or clear procedures, discouraging investors from starting businesses in the country.
"In the future, investors will be directed to invest in brownfield [existing] projects," she said.
The Joint European Chambers' 2019 Business Confidence Index (BCI) revealed that investors were not impressed by the economic stimulus provided under a series of economic policy packages implemented by the government since early last year.
Like last year, the regulatory environment and bureaucratic inefficiency remain the top two investment challenges, with 78 percent and 75 percent of respondents worrying about those aspects.
Investments, the second highest contributor to Indonesia's GDP after household spending, grew sluggishly at 5.01 percent in the second quarter, lower than the 5.85 percent expansion booked over the same period last year, Statistics Indonesia (BPS) data showed.
The indicator contributed to a slowdown in GDP growth in Indonesia, which was recorded at 5.05 percent in the second quarter, its slowest pace in two years.
At the same time, higher foreign direct investment (FDI) is needed to ensure a lower capital outflow risk amid a volatile global market going forward, Destry said.
As of July, capital inflows into Indonesia stood at Rp 170.1 trillion (US$12 billion) in the form of stocks and sovereign bond papers. "It will be better if it is supported by high FDI," said the former Bank Mandiri economist. (asp)