Indonesia flags investment efficiency gap with Vietnam
Deputy investment minister Todotua Pasaribu said Indonesia would address licensing and land obstacles that prolong the investment process.
Vietnam has become one of Indonesia’s toughest competitors in ASEAN, Indonesian Deputy Investment and Downstreaming Minister Todotua Pasaribu said, citing economic growth of 9.9 per cent against President Prabowo Subianto’s target of 8 per cent for Indonesia.
Todotua, who is also deputy head of the Investment Coordinating Board (BKPM), said the gap extended to the efficiency of capital use. Indonesia’s Incremental Capital Output Ratio (ICOR) stood at 6.8, compared with Vietnam’s 3.8. The indicator measures how productively and efficiently capital generates economic growth.
He said producing the same goods could cost up to twice as much in Indonesia as in Vietnam. He attributed Indonesia’s high ICOR to excessive operating costs, bureaucratic obstacles and intermediaries, saying these factors also weakened the competitiveness of Indonesian exports.
As an example, Todotua pointed to Indonesian tin processed into ingots and supplied to solder factories in Malaysia and Batam. Solder made by Malaysian factories could still be sold in Indonesia for less than comparable domestically manufactured products, he said.
Todotua said his ministry was committed to shortening an investment process that takes an average of 4 to 5 years because of licensing and land problems. It would establish investment desks and conduct outreach in the regions to help unblock projects facing bureaucratic hurdles across sectors.
