Apindo: If You Want Economic Growth Of Up To 7 Percent, The Investment Ratio To GDP Must Be 47 Percent

Chairman of the Indonesian Employers' Association (Apindo) Shinta W Kamdani. (Photo: Doc. Antara)

JAKARTA - Chairman of the Indonesian Employers' Association (Apindo) Shinta Kamdani said Indonesia needed an investment ratio to GDP of 41 percent to 47 percent so that economic growth could reach 6 percent to 7 percent.

"If we want [economics to] grow 6-7 percent, then an investment ratio to GDP is needed between 41-47 percent," he explained on the 2024 Midyear Challenges Indonesia Business agenda, Monday, July 29.

Shinta said that Indonesia's economic growth is currently still stagnant in the range of 5 percent until 2024. Meanwhile, the investment ratio to GDP was recorded at 29 percent by the end of 2023.

"So this marks that our homework is still long," he said.

Shinta conveyed one of the investment problems faced by Indonesia, namely the incremental capital output ratio (ICER). According to him, Indonesia's ICOR is still quite high, namely 6.8 percent, or not competitive with countries in the Asean Region whose ICOR is in the range of 4 percent to 5 percent.

Shinta said that with the condition that ICOR is still high, it will hinder incoming investment, so that it will have an impact on Indonesia's economic growth. This is because every 1 percent of economic growth requires an additional investment ratio to GDP of 6.8 percent.

For this reason, Shinta said that Indonesia needs to increase efficiency in various universal business costs, cost of finance, cost of compliance, as well as energy costs, electricity, labor and others.

On the other hand, Shinta said that Indonesia also needs financial deepening, which is marked by an increase in the scale of financing and expansion of distribution from business financing for business sectors which currently still require adequate business financing.

Previously, President-elect Prabowo Subianto admitted that he was betting with several ministers from other countries regarding Indonesia's economic growth which could grow to reach 8 percent during his leadership.

"If I am even more brave. We must dare to set higher targets. If I am optimistic we can achieve 8 percent growth. I am betting with several ministers from a neighboring country," he said at the launch of the Geoportal Policy One Map 2.0 White Paper One Map Policy Beyond 2024, Thursday, July 18.

But unfortunately, Prabowo was reluctant to reveal which country was betting on him. Prabowo said that if Indonesia's economic growth managed to reach 8 percent, the country's ministers would treat him to dinner.

"I don't mention which country. But there are several ministers from a country betting on me. He said your excellence, if you can achieve 8 percent growth, once, just once in five years to come, we reach 8 percent. They are going to buy me dinner. They will buy dinner for me!" he said.