Indonesia's Downstream Project Is Controlled By Foreign Investors, Bahlil: Local Companies Difficult To Get Banking Financing

JAKARTA - Investment Minister/Head of the Investment Coordinating Board (BKPM), Bahlil Lahadalia, admitted that downstream projects in Indonesia are dominated by foreign investors, compared to local entrepreneurs.

Bahlil said, the high number of foreign investments in the downstream sector can be seen from foreign investment or foreign investment (PMA) entering Indonesia.

Where 55.1 percent entered the manufacturing sector, especially the downstream project.

Meanwhile, based on data presented by Bahlil, domestic investment (PMDN) of 53 percent is actually included in the service sector.

"So indeed the downstream sector is driven more by our FDI, PMA. This is the composition, if manufacturing, the industry is 55.1 percent inversely proportional to PMDN. Our PMDN is 53 percent service," Bahlil said at a press conference, at the Office of the Ministry of Investment, Jakarta, Monday, April 29.

Difficult Access To Financing

Bahlil revealed that the cause of downstream projects is more dominated by foreign entrepreneurs, one of which is due to hampered access to financing.

"If my friends from economists say why downstreaming is only used by more foreigners, this is our homework. Where is our homework? First, our banking must be open to financing to the downstream sector," he said.

Bahlil said that domestic entrepreneurs have difficulty getting access to financing from banks to enter the downstream project.

"As long as our banking does not respond as the most important part in getting new opportunities, he just wants to be conventional, then surely his PMA is more manufacturing," he said.

Therefore, according to Bahlil, foreign entrepreneurs have easier access to finance to enter the downstream project. Bahlil also hopes that this will be implemented by banks in Indonesia.

"I make sure that if the credit is outside, surely they will fund export proceeds from their commodities and will settle the principal installments without interest from the original loan where the country exists," he explained.

"So if we want our complete DHE (export result foreign exchange) from downstream production, then our national banks must be willing to open up to providing credit to their customers," he continued.

Based on data from the Ministry of Investment, the realization of investment in downstream projects in the first quarter of 2024 reached IDR 75.8 trillion.

In detail, the mineral mining project has a value of IDR 43.2 trillion, which includes investment in nickel mining of IDR 33.4 trillion, copper of IDR 8.4 trillion, and bauxite of IDR 1.4 trillion.

Then, in the forestry sector it is IDR 13.3 trillion, which includes investment in the pulp and paper industry.

Furthermore, in the agricultural sector it is IDR 11.1 trillion, especially for the palm oil (CPO) industry.

Then, in the oil and gas industry, IDR 7.4 trillion (petrochemicals), and the electric vehicle ecosystem, especially the electric vehicle battery factory, IDR 800 billion.