It takes a lot of capital to realize investment in Indonesia because inefficiency is still high. This high incremental capital output ratio (ICOR) can be an obstacle in accelerating Indonesia's economic growth, which is one of the government's main focuses.

To achieve the growth target of 6.3% by 2026, the National Development Planning Agency (Bappenas) estimates that Rp 8,297.8 trillion in investment is needed. Meanwhile, based on the National Long and Medium Term Development Plan (RPJMN) 2025-2029, investments totaling IDR 47,573.45 trillion are needed to achieve 8% economic growth. 

Bappenas detailed that the largest investment needs were allocated in the private sector and the community, which reached 89.9% or IDR 7,4671.1 trillion. Meanwhile, investment by state-owned enterprises is around 5.97% of the total target. Meanwhile, investment by the government occupies the smallest portion (4.22%).

Based on investment realization so far this year, secondary sectors - such as the basic metal industry, metal goods, non-machinery and equipment - accounted for 14.1% or IDR 67.1 trillion of investment realization in the Q2-2025 period. Meanwhile, the primary sector, namely mining, took second place at 11.2% or IDR 53.6 trillion in the same period, followed by tertiary sectors such as services (IDR 44.8 trillion), transportation, warehouse and telecommunications (IDR 44.2 trillion), and trade and repair (IDR 40.0 trillion).

The high growth target with the estimated high investment needs is faced with the condition of the high ICOR value in Indonesia. ICOR is an indicator that measures how much capital is needed to produce one unit of economic output. The higher the ICOR number, the more inefficient the investment.

Bappenas said that Indonesia's average ICOR since 2021 has consistently been above 6%. This figure is higher when compared to other countries in Southeast Asia, such as Singapore, the Philippines, Malaysia, and Vietnam, which have an average ICOR of around 4%. 

The high ICOR rate has the potential to slow down the pace of economic acceleration. Ideally, the ICOR value that is efficient in investing is in the range of 3%-4%.

In order to attract private and state-owned investment in line with the target, the government must create a conducive investment climate by taking measures such as regulatory reform, bureaucratic simplification, and infrastructure development.