Therefore, the World Bank considers reducing the CAD is not a solution. This country would have to increase foreign direct investment (FDI).
Foreign investment tends to be more stable and can create jobs. Investors cannot easily withdraw their money from this country.
Based on the following Databoks chart, the foreign investment value has tended to fall since 2017. International funds, as explained above, are mostly directed to neighboring countries, especially Vietnam.
In addition to regulatory issues, according to World Bank research, foreign investors are reluctant to invest capital in Indonesia because there are not enough experts in manufacturing. There are logistics and electricity costs, which tend to be expensive. All this makes Indonesia uncompetitive compared to other Southeast Asian countries.
Government Ways of Attracting Foreign Investment
The World Bank provides many recommendations for this matter. In essence, the government needs to simplify regulation and synchronize policies. The law concerning foreign experts working in Indonesia also needs to be relaxed so that knowledge transfer can run faster.
Trade Minister Enggartiasto Lukita promised to revoke regulations deemed to hamper foreign investment inflows, including those that wanted to relocate factories. “We must seize the opportunity,” he said during the Central and Regional Government Coordination Meeting (Rakorpusda) on Wednesday (9/4) night, as quoted by Antara.
He admitted that he often received complaints from investors about the lack of synchronization on rules between the central government and the regional government. However, this can be overcome by the commitment of the governors to provide licensing facilities.
Furthermore, Industry Minister Airlangga Hartarto said the government is preparing a presidential regulation to accelerate the implementation of Making Indonesia 4.0. The rule will synchronize various programs and activities across sectors.
“Later, we will see what sectors can be harmonized, and this will make the execution more agile,” Airlangga said.
The Coordinating Economic Minister Darmin Nasution also hopes to cut hundreds of regulations relating to the investment process in Indonesia soon. In the next one to two months, the rules with a level under the law will be cut off. “It's finished within a month,” he said.
Meanwhile, it will require more time to cut rules with the same level as the law. The reason is that the government must make an omnibus law or new law to amend other related regulations.