The realization of foreign investment in Indonesia in 2018 is estimated to miss the target of Rp765 trillion to Rp730 trillion. Meanwhile, in the political year 2019 the realization of investment is expected to slow down according to the political year cycle when foreign investment declines.
Foreign investment (and domestic investment) always has a positive impact on the development of a country, such as Indonesia, which has opened up to foreign investment since the late 1960s. Surely the value of this investment contributes to output or gross domestic product (GDP).
Investment will drive sales growth from companies, including medium and small businesses in Indonesia as well as supporting companies (vendors, suppliers) because foreign investment requires a bit of the role of local companies. The next impact is to provide a multiplier effect in providing employment.
As an illustration, if a factory is established in an area, a retail store will automatically stand because there are many people coming and staying in the area. Then, there will also be a restaurant and lodging business. Not to mention a health insurance company. Finally, the chain effect will improve the economy of the community.
It is not strange if the government does not hesitate to provide easy investment and build high capital integrated industrial estates, manufacturing, mining and integrated farms that are equipped with good transportation access, supporting infrastructure, and light tax incentives. Because, all invested capital will move the economy even bigger.
According to the Investment Coordinating Board data, foreign investment in Indonesia in the first semester of 2015 in the fields of industry, electricity generation, plantations, mining services, transportation, tourism, and livestock amounting to Rp92 trillion was projected to absorb 65,000 direct workers. The counter effects for the creation of indirect labor are projected to be around four times, or around 260,000 workers. In addition, from each creation of a manufacturing sector employment will create 1.6 jobs in services (services, services).
Actually it is not enough if we assess the impact of investment only from the growth of welfare, but we also have to assess the government’s efforts in encouraging local industries to play a more shared role with this foreign investment. We see, since Japanese automotive investment in the 1970s to today, the level of domestic components (TKDN) for the automotive industry has been more than 70%. For the Jakarta MRT and LRT projects, TKDN has only reached 40%. The Jakarta-Bandung fast train is targeted to reach 60%.
There are several challenges that often arise. First, when foreign companies use TKDN, but the local components used are produced by companies whose majority of the shares are owned by foreign companies so that profits are still sent to the country of origin of the foreign company.
Second, to reduce income tax, as many foreign companies as possible use the import component. These components are produced by companies or subsidiaries of these foreign companies. Once again, capital was sent back outside Indonesia.
The government’s step in encouraging improvements in TKDN by giving incentives gradually has been very appropriate. Just say for example for 30% TKDN and 40% TKDN each given tax breaks of 5% and 6%.
In various industries, the actual total cost of using TKDN is not always cheaper than using imported goods. Usually it is caused by the quality of goods that are lower than imported goods. However, however, the local industry must always be given the opportunity, whose long-term goals can drive the progress of the domestic industry.
The next potential of the arrival of foreign investment is knowledge for Indonesian workers and technology transfer. As a result, the arrival of foreign investment (money and goods) is not a substitute (substitute) for the existence of local industries and goods, but is a complement and a learning reference for industries in Indonesia.
War'S Blog 