Governor of the Indonesian Central Bank, Perry Warjiyo, highlights two main reasons that make Foreign Investment in Indonesia lagging behind fellow ASEAN member Vietnam.

In the KAFEGAMA Seminar entitled “Towards Growth Towards Advanced Indonesia” at Menara BTN, Jakarta, on Saturday, December 14, 2024, Perry cited the time-consuming licensing process as one of the main obstacles.

"Previously, it was called Building Construction Permit (IMB), now it is Building Construction Approval (PBG). Plus, spatial planning matters, licensing takes two to three years. This makes investors reluctant to come to Indonesia," Perry said.

Based on the Global Investment Report from the UN Conference on Development and Trade 2023, Indonesia is ranked second in Southeast Asia in attracting foreign investment, losing to Vietnam. The total foreign investment in Indonesia was recorded at US$21.96 billion, while Vietnam managed to obtain US$23.18 billion.

"Indonesia is losing to Vietnam, especially in the electronics, textiles, and several food service sectors. Foreign investment from Japan and Korea prefer Vietnam because the licensing process in Indonesia takes too long," Perry cited.

Investment realization

However, the Statistics Indonesia (BPS) noted that the realization of Indonesian Foreign Direct Investment (PMA) in 2023 was recorded at US$50.2 billion. Singapore was the largest contributor with an investment value of US$15.3 billion, or 30.4 percent of total foreign investment.

The next position is occupied by China with an investment of US$ 7.4 billion, followed by Hong Kong which contributed to US$ 6.5 billion.

Perry emphasized that improving the licensing process must be a priority to increase Indonesia's competitiveness.

"If the licensing process can be cut down, then Indonesia's chances of attracting more foreign investment, especially in strategic sectors, such as electronics and textiles, will be much greater," he said.

With improved regulations and licensing efficiency, Indonesia is expected to be able to match and even surpass Vietnam in attracting foreign investment in the coming years.