Investment Realization Is Not Affected by the 2024 Election

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If analyzed by sector, the largest realization of investment in the first quarter of 2024 is in the infrastructure and services sector with a share of 42.1 percent of the total or an amount of IDR 169.2 trillion, followed by the manufacturing sector with a share of 40.2 percent or an amount of IDR 161.1 trillion, and the primary sector with a share of 17.7 percent or an amount of IDR 71.2 trillion.

Next, if we look at it from the perspective of foreign investment (PMA), the realization in Q1-2024 reached Rp 204.4 trillion. The top five PMA realization sub-sectors are basic metal industries, metal goods, non-machinery and equipment; mining; transportation, warehousing, and telecommunications; chemical and pharmaceutical industries; and paper and printing industries.

The realization of domestic investment (PMDN) in the first quarter of 2024 was recorded at Rp 197.1 trillion. The top five sub-sectors of PMDN realization are transportation, warehousing, and telecommunications; mining; food industry; other services; as well as trade and repair.

"Since 2021, the Indonesian government has been continuously pushing for downstreaming. The composition of the sectors targeted for investment so far has been in line with what we have hoped for," he said.

As for the top five locations for foreign investment realization in the first quarter of 2024, they are West Java, followed by Central Sulawesi, DKI Jakarta, East Java, and North Maluku. Meanwhile, the top five locations for domestic investment realization in the first quarter of 2024 are DKI Jakarta, West Java, East Java, Riau, and East Kalimantan.

Together with the team, we tried to pick up the ball so that the target was achieved

Central Sulawesi and North Maluku are known as centers of nickel smelters. Meanwhile, in East Java, precisely in Gresik, there is a copper smelter owned by PT Freeport Indonesia.

"The investment of Freeport in Gresik amounts to 3 billion US dollars. Until now, Freeport has been exporting copper concentrate, while there are many derivative products from the concentrate. Starting in May or June 2024, Freeport's smelter there will already produce downstream products," said Bahlil.

Also read: Freeport Smelter in Gresik KEK Creates Added Value to Mining Products

Bahlil added, in particular, downstream investment realization had reached IDR 75.8 trillion or 18.9 percent of the total investment realization in the first quarter of 2024. This amount consists of the realization of mineral downstreaming in the form of nickel, copper and bauxite smelters (Rp. 43.2 trillion), forestry downstreaming in the form of pulp and paper (Rp. 13.3 trillion), crude palm oil/oleochemicals( IDR 11.1 trillion), petrochemicals (IDR 7.4 trillion), and electric vehicle batteries (IDR 0.8 trillion).

"In the future, downstreaming will continue to be encouraged as the elected presidential candidate has also mentioned the importance of downstreaming. We hope that the geopolitical atmosphere does not widen. What we are worried about is the conflict in the Middle East because it affects oil prices which ultimately relate to production costs," said Bahlil.

The importance of incentives

Head of the Center of Industry, Trade, and Investment at the Institute for Development of Economics and Finance (Indef), Andry Satrio Nugroho, when contacted separately, expressed his opinion that the current war in the Middle East or Russia-Ukraine is a small fragment that has an impact on downstream investment. The most influential factor is to what extent the Indonesian government is willing to offer bigger incentives and compete with other countries.

"The treatment of nickel downstream investment is definitely different from other commodities. "We think this is not only the work of the Ministry of Investment/BKPM, but also other ministries such as the Ministry of Industry, Ministry of Finance and Ministry of Energy and Mineral Resources," said Andry.

Andry also believes that the impact of the Russian-Ukrainian and Israeli-Palestinian wars is the export market for downstream products. Moreover, the majority of Indonesia's downstream products are still at the intermediate stage or have not yet become final products. At the same time, there was economic weakness in a number of countries, such as China and Japan. According to him, these two countries are the main buyers of Indonesian downstream products.

"Indonesia needs to take immediate action to anticipate this. Currently, the interest rate has risen and the rupiah has weakened against the US dollar. Without any anticipatory measures, industrial expansion will also be difficult to occur," he said.

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