Global Geopolitical Problems Haunt Indonesia's Investment Prospects

Rupiah illustration (Photo: dock. Antara)

JAKARTA - There are a number of global geopolitical risks that can have an impact on Indonesia's investment prospects in 2024.

"Indonesia is a country that is very interconnected with the global economy, so the global geopolitical risk will certainly have an impact on the Indonesian economy," said Associate Researcher Institute for Development of Economics and Finance (Indef) Asmiati Malik quoting Antara.

Asmiati said that there are several things that need to be considered regarding the global geopolitical risk scenario next year.

First, there was a shift in the economic center from the West to Asia, with China prominently as the main producer and exporter, particularly in the electric car sector. This reflects the dynamics of the economy increasingly leading to Asia.

"If we look at old players like Japan and Germany, the decline has decreased while the US itself is stagnant," said Asmiati.

The next thing is the general election which will take place next year in several countries, including Indonesia, South Korea, Taiwan, India and the United States.

He said the general election was considered to have the potential to create political uncertainty that could disrupt the investment climate as well as add to the element of uncertainty in the global market.

Then, he reminded of the increase in interest rates and the escalation of trade wars as other risk factors. The increase in interest rates could increase production costs, while the escalation of trade wars could suppress global demand, potentially having a negative impact on investment in various sectors.

Asmiati added, from the agricultural sector, Indonesia and Malaysia are expected to experience a decline in palm output or output. This will certainly have a negative impact on the export sector and the Indonesian economy as a whole.

"Asia will generally still be influenced by el Nino," said Asmiati.

Asmiati said that these risks could cause foreign investors to hesitate to invest in Indonesia.

Asmiati further said that the Indonesian government itself targets an investment of IDR 1,650 trillion by 2024, an increase of 17.85 percent compared to 2023.

"This target will be difficult to achieve if the geopolitical risk cannot be controlled," said Asmiati.

Therefore, Asmiati advised the government to increase investor confidence by improving the investment climate in Indonesia.

Furthermore, the government also needs to expand investment coverage to sectors that have high added value and not only focus on the primary sector.

In addition, according to him, the government also needs to take advantage of existing opportunities, such as Indonesia's potential as one of the countries with the largest population in the world, as well as non-block political policies that can open up opportunities for cooperation with various countries.

"Building trust is the key for long term investment success," said Asmiati.