Indonesia Gets Investment Ministry

As part of a cabinet reshuffle at the end of the first quarter of 2021, the President of Indonesia, Joko Widodo (Jokowi), transformed the Indonesian Investment Coordinating Board (Badan Koordinasi Penanaman Modal or “BKPM”) from a governmental agency charged with implementing and supervising investment policy into a full-fledged ministry, known as the Ministry of Investment/BKPM. The upgrade is an effort to enhance the ease of doing business in Indonesia.

The transformation came into being on April 28, 2021, with the enactment of Presidential Regulation No. 31 of 2021. President Jokowi appointed the head of the BKPM, Bahlil Lahadia, as Minister of Investment.

New Ministry of Investment

The Government of Indonesia (the “GOI”) sees the transformation of the BKPM into a ministry as a necessary upgrade to boost and enhance the ease of doing business in Indonesia.

Under Presidential Regulation No. 63 of 2021 dated July 29, 2021, the main function and authority of the Ministry of Investment is to formulate and stipulate investment policy, and to coordinate and synchronize the implementation of such policy. This will make the Ministry of Investment the focal point for connecting all investment sectors from the technical ministries and bridging the interests of the business sector and the government. The GOI expects the Ministry of Investment to create a more conducive investment climate in Indonesia.

Stipulate Regulations and Policies

Much of the focus on the Investment Ministry has been on its authority to formulate and stipulate regulations and policies. In his press conference on the day the new ministry was established, Mr. Lahadia said the BKPM, as an investment agency, executed prevailing laws and regulations, but was not able to formulate new regulations or shape policy that substantially influenced investment arrangements in Indonesia.

Publicly, the BPKM is known as a government agency handling investment licensing. Pursuant to Presidential Regulation No. 64 of 2021, the main duty of the BKPM will now be coordinating the implementation of policy and services in the investment sector, in accordance with the regulations.

Its work will consist mostly of assessing and issuing recommendations on national investment plans, coordinating national investment policy, promoting partnership with stakeholders, and developing the investment potential in every region in Indonesia. These duties and functions are not drastically different from what they were under the previous regulation on the duties and function of the BKPM.

Investment Target

Upon its establishment, the Ministry of Investment has an investment realization target to achieve. Earlier this year, the GOI targeted total investment realization of 900 trillion rupiah (US$62.2 billion) for 2021. In the first quarter of 2021, total investment realization in Indonesia was on the rise. Between January and March, Indonesia saw a total investment realization of 219.7 trillion rupiah (US$15.20 billion). (10 September 2021)

By Samuel Yefta Abednego, SSEK, Indonesia, a Transatlantic Law International Affiliated Firm. 

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