Indonesia is implementing a series of economic policies aimed at attracting global investors by 2025. These initiatives encompass the establishment of a sovereign wealth fund, the introduction of a “Golden Visa” program, participation in the global carbon credits market, and the enactment of the Omnibus Law on Job Creation.
Establishment of the Danantara Investment Management Agency
In a significant move to enhance the management of state assets, the Indonesian government has received parliamentary approval to establish the Danantara Investment Management Agency, modeled after Singapore’s Temasek. With an initial capital of 1,000 trillion rupiah (approximately $61 billion), Danantara will manage holdings in major state-owned enterprises such as Bank Mandiri, Bank Rakyat Indonesia, and Pertamina. The agency aims to improve performance and returns from state investments, thereby bolstering investor confidence. However, concerns have been raised about potential political interference, which could impact the agency’s effectiveness murid keroyok guru .
Introduction of the “Golden Visa” Program
To further entice foreign investors, Indonesia has launched a “Golden Visa” program offering long-term residence to individuals and corporate investors who commit substantial financial resources to the country. For individuals, a five-year visa requires a $2.5 million investment in a company, while a ten-year visa necessitates a $5 million investment. Corporate investors can obtain visas for their directors and commissioners by investing $25 million or $50 million for five and ten-year visas, respectively. Special incentives are also available for investments in Indonesia’s new capital city in Borneo. Since its inception, the scheme has attracted nearly 300 applicants, contributing $123 million to the economy.
Participation in the Global Carbon Credits Market
Indonesia has entered the global carbon credits market to fund its transition to green energy. By selling credits tied to energy projects, the country aims to attract investment while promoting environmental sustainability. On the IDX Carbon platform, operated by Indonesia’s national stock exchange, 1.78 million credits are available, sourced from projects including hydropower and natural gas. Analysts caution that high-quality carbon credit buyers may prefer credits from renewable sources like solar or wind. Despite initial sales of 49,807 tonnes of credits, the market faces scrutiny over potential double counting of emission savings and reliance on outdated methodologies.
Enactment of the Omnibus Law on Job Creation
The Omnibus Law on Job Creation represents a comprehensive effort to reform Indonesia’s regulatory framework to attract investment. The law mandates the creation of an “Investment Management Agency” to establish a sovereign wealth fund aimed at attracting investment and supporting the economy. It also introduces changes to labor regulations, including adjustments to minimum wage calculations, severance pay, and work hours, to create a more flexible labor market. Additionally, the law relaxes environmental regulations for businesses not classified as “high risk” and reduces the list of industries barred from receiving private investment from 300 to six.
Investment Targets and Economic Outlook
Indonesia has set an ambitious investment target of Rp 1,906 trillion (approximately $119.72 billion) for 2025, marking a 15.45 percent increase from the 2024 target. Investment Minister Rosan Roeslani outlined that this target is part of a broader strategy to achieve sustained economic growth, with a projection for steady increases over the next five years. The government aims for an annual growth rate of 16.75 percent to achieve an 8 percent economic growth rate. To reach these goals, Indonesia will need a total investment of Rp 13,528 trillion over the next five years. The implementation of the Job Creation Law has been credited with streamlining investment processes and expediting business licensing, contributing to this positive outlook.
The World Bank projects that Indonesia’s foreign direct investment (FDI) could reach 1.4 percent of its gross domestic product (GDP) by 2025, up from 1.1 percent in 2022. This anticipated increase is attributed to the Job Creation Law and the government’s strategy of processing raw minerals domestically to add value. The World Bank emphasizes that an open market is essential for Indonesia to achieve high-income status by 2045, noting that the Job Creation Law has liberalized private investments by removing restrictions in various sectors.
Through these comprehensive economic policies, Indonesia aims to create a more attractive environment for global investors, fostering economic growth and development leading up to 2025 and beyond.