Indonesia posts year's first FDI growth in Q3; Jokowi targets lower exports of raw coal

A Balinese man wears face mask as he participates in the Hindu ritual of "Grebeg" at the Tegalalang village in Bali, Indonesia on Oct 22, 2020. In this biannual ritual, participants paint their bodies with colorful paint and parade around their village to ward off evil spirits. - AP

JAKARTA, Oct 23 (Reuters): Indonesia's incoming foreign direct investment (FDI) grew for the first time in three quarters in the July-September period and could continue to rise next year helped by a new deregulation law, its investment board chief said on Friday.

The Investment Coordinating Board (BKPM) recorded a total of 106.1 trillion rupiah (US$7.24 billion) worth of FDI in the third quarter, excluding banking and oil and gas sectors, up 1.1% on an annual basis.

Singapore, China excluding Hong Kong and Japan were the main sources of FDI, with US$2.5 billion, US$1.1 billion and US$0.9 billion in investments, respectively, BKPM chief Bahlil Lahadalia said in a virtual news conference.

Top sectors benefiting from FDI were base metals, transport, warehousing and telecommunication and utilities, BKPM data showed.

"I assure you investment realisation in 2021 will be higher than 2020," Bahlil said.

He noted the government's flagship Job Creation law passed by parliament earlier this month should boost appetite for investment in Southeast Asia's largest economy.

The jobs legislation, a revision of more than 70 existing laws that was passed on Oct. 5, is designed to remove longstanding impediments to doing business by cutting red tape, easing restrictions on foreign investment and boosting labour market competitiveness.

While the government says it will lead to widespread employment generation, trade unions, student groups, academics and civil society groups have held protests across the country against a law they say harms protection for workers and the environment.

Indonesian President Joko Widodo ordered his cabinet ministers on Friday to set a target to reduce exports of unprocessed coal and accelerate plans to develop derivative industries for processing the fuel in Southeast Asia's biggest economy.

Indonesia, the world's biggest thermal coal exporter, should quickly develop a local industry to upgrade, liquefy and gasify its coal, the president said, urging ministers to determine the volume of output that could be used for such processing.

"I want to seek solutions on the slow development of the derivative industry because we have been exporting raw coal for too long," Jokowi, as the president is widely known, said in a broadcast of a virtual meeting.

Indonesia has been seeking to squeeze more value out of its rich mineral resources ranging from copper to nickel by processing raw materials at home.

Indonesia produced 610 million tonnes of coal last year and has targeted 550 million tonnes in 2020. Most of indonesia's coal is exported, with the rest mainly used in power generation.

To encourage the sector, the government's recently passed Job Creation Law offers zero royalty payments if companies create more value from coal, while a mining law passed in May guarantees permit extensions if miners integrate processing.

The indonesia Coal Miners Association (ICMA) welcomed incentives for a downstream industry.

"But to push for this acceleration, a thorough study is needed and ICMA is ready to assist the government to develop the roadmap," said executive director Hendra Sinadia.

If successful, the plans could make up for weaker imports, said Shahim Zubair, a director with Fitch Ratings. - Reuters
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Indonesia , FDI , Growth , Q3 , Jokowi , Targets , Coal , Lower Exports


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