Applause erupted in the Edutorium of Universitas Muhammadiyah Surakarta when President Prabowo Subianto loudly delivered the good news: the national investment target for 2025 had been achieved four months before the end of the year.
"I was given a report by the Minister of Investment that Indonesia's investment this month has reached the target set by the state budget last year," Prabowo said, greeted by the cheers of thousands of Indonesian Solidarity Party (PSI) cadres attending the PSI Congress 2025, Sunday night (20/7).
"We have reached the 2025 state budget target this August, four months before the end of the year," he continued.
The target in question is no small number: IDR 1,905.6 trillion, an increase of around 15.5% compared to 2024. This achievement, Prabowo said, is proof of the business world's confidence in Indonesia, as well as important capital to support the 5.3% economic growth target this year.
Based on a report from the Ministry of Investment and Downstream Development/BPKM, entering the first quarter of 2025, investment realization was recorded at IDR 465.2 trillion, growing almost 10 percent compared to the same period last year. Of this figure, the largest portion still came from Domestic Investment (PMDN) with Rp 260.8 trillion, while Foreign Investment (PMA) contributed Rp 204.4 trillion.
The basic metal industry once again dominates the list of the top five investment sectors with a value of IDR 136.3 trillion. On the other hand, Singapore is recorded as the largest contributor to PMA, followed by China, Hong Kong, Japan, and Malaysia.
The government through BKPM is optimistic that the upward trend in investment will continue, especially since the 2025 investment target is set quite ambitiously at IDR 1,905.6 trillion. It is hoped that this capital flow will not only strengthen industrial downstreaming, but also expand equitable development, create jobs, and encourage UMKM to enter the national industrial supply chain.
Investment is still an important motor of the Indonesian economy. Citing data from the Central Statistics Agency (BPS), the investment aspect contributed to 28.03 percent of Indonesia's total Gross Domestic Product (GDP) in the first quarter of 2025. The influx of investment certainly stimulates economic growth to be more spurred.
Investment Should Provide Certainty and Added Value
Deputy Chairman of the Coordinator for Investment, Downstream, Energy and Environment of the Indonesian Chamber of Commerce and Industry (Kadin) Bobby Gafur assessed that the investment achievements claimed by President Prabowo are not only good news, but also a momentum to encourage more ambitious economic growth targets in the future.
"Indonesia's potential is still very large and attractive for investment development," Bobby said when contacted, Monday (7/21). "To achieve 8 percent economic growth in the next five years, the investment portion must be able to increase significantly, the figure according to BKPM data can be around Rp. 13,000 trillion."
According to him, leading sectors such as downstream are not only limited to the mining and mineral sector (Minerba), but also plantation products such as oil palm (CPO).
"We are the largest CPO player in the world. It can be developed into biodiesel and various other derivative products," Bobby explained.
However, Bobby reminded that to maintain investment attractiveness, legal certainty is an absolute requirement.
"Return or return on investment on paper does look attractive. But often the problem is legal certainty," he said.
Bobby cited changes in regulations, disturbances in industrial areas, and inconsistent policies as real challenges in the field.
"The government must be firm with programs that have become national priorities, especially if they have entered the National Strategic Project (PSN) or are regulated through a Perpres," he added.
In addition, Bobby also highlighted the impact of global conditions, such as ongoing conflicts in the Middle East and Ukraine, as well as protectionist policies such as increased import tariffs from the United States. Even so, he remains optimistic that Indonesia has the opportunity to expand its market, including through agreements such as the IU-CEPA which allows 0 percent tariffs to Europe.
"There is still a lot of homework, but I think the government's steps are heading in the right direction," concluded Bobby. "What is important now is to ensure that all these investment opportunities actually reach the field and have a real impact."
Investment is always high, but growth is just the same?
Researcher at the Center for Industry, Trade, and Investment of the Institute for Development of Economics and Finance (INDEF) Ahmad Heri Firdaus sees the achievement of large investments as good news, as well as a reminder to focus on quality, not just quantity.
He emphasized that about 28 percent-30 percent of our economy is contributed by investment. According to him, with such a large investment, it is expected to have a commensurate impact.
"Don't let the investment continue to rise, but economic growth is just the same," he said,
One of the key indicators of investment productivity is the Incremental Capital Output Ratio or ICOR. The lower the ICOR, the more productive the investment is in generating growth. Unfortunately, Indonesia's ICOR is still high. This means that to produce one unit of output, it requires more capital than competing countries such as Vietnam.
"Why is capital wasteful? Because there are still many high costs in the field," said Heri. "Logistics costs are expensive, electricity costs are high, wages have risen but productivity has not been balanced, not to mention layered taxes from the center to the regions."
As a result, only a small portion of investment funds actually make it to production activities, with the rest going to structural costs.
Not All Sectors Face the Same Challenges
The challenges also vary. Labor-intensive industries such as textiles and footwear, said Heri, are faced with rising labor wages that are not always accompanied by increased productivity and the use of technology.
"Technology in our textiles is still relatively behind," he said. "There are some that are very modern, using 4.0 machines, digital. But many are still using old machines. All should be able to upgrade."
On the other hand, capital-intensive industries such as mining or petrochemicals face different issues, such as the high cost of research and development (R&D) and the need for large capital to build high-tech plants.
"If the government wants to help, it must be tailored to its character. Not all industries can be given the same incentives," added Heri.
The government actually realizes the importance of fiscal incentives such as tax holidays or import duty exemptions for modern machinery. However, the decision to provide incentives cannot be arbitrary.
"Incentives mean that the state's income from taxes is reduced," Heri explained. "So the government is willing to give it, as long as the industry can prove that later they will create greater profits, including other tax deposits."
Typically, industry associations have to bring academic studies that show the potential for growth, job creation, and other tax increases such as VAT.
Transparency, Synergy, and Inclusiveness are Key
One other important note: so far, investment realization data has only been announced in aggregate, whereas the public has the right to know more details. Which ones are new plans, which ones have been fully realized, and in which sectors.
"The government knows the details through the OSS system, and in the regions there are investment offices," said Heri. "The public only knows the total. Even though it is good if it is opened in more detail, so that the public can also assess which sectors need extra encouragement."
Heri also emphasized the need for synergy between ministries. BKPM, for example, is tasked with bringing in investors, but investors also look at infrastructure, logistics, and stability, things that are the domain of other ministries or local governments.
"Don't let BKPM succeed in convincing investors, but when they want to enter the region it turns out that there is no electricity, or the roads are not good," he said. "All must move together."
Heri also emphasized that it is time for the government to focus on making investment more productive and inclusive.
"The quality of the growth is important, not just the numbers," he said. "These investments must create jobs, increase productivity, reduce inequality, and strengthen our domestic industries."
With investment targets being achieved faster, the next question is no longer "how much?" but "for whom?" and "what is the impact?". This is the big homework for Indonesia's development going forward: ensuring that growth is not just a number, but real prosperity for all.
