IDR 1,500 Trillion Worth of Investments Failed to Enter Indonesia in 2024

Deputy Minister of Investment and Downstreaming, who also serves as Deputy Head of BKPM, Todotua Pasaribu, stated that several issues prevented massive investment from flowing into Indonesia, ranging from licensing challenges to overlapping regulations.

“These kinds of issues — such as an unconducive licensing climate and contradictory policies — must serve as a shared reflection,” said Todotua on Thursday (July 3), as reported by Antara.

He emphasized that input from stakeholders is essential to improve existing policies.

“Our ministry has already prepared a concept to address this,” he added.

Even before Todotua highlighted the issue, the government had acknowledged these obstacles and introduced several strategies to improve investment inflow.

The efforts include:

1. The Omnibus Law

The Job Creation Law, commonly known as the Omnibus Law, was one of the key initiatives under President Joko Widodo’s administration to simplify regulations and attract investors.

The law was passed on October 5, 2020, through Law No. 11/2020, amid a rapid and controversial legislative process.

It aimed to simplify the investment licensing process, revise wage formulas in favor of employers, and more.

However, in November 2021, the Constitutional Court declared the law conditionally unconstitutional due to procedural flaws and lack of transparency. The government was given two years to revise it.

In response, President Jokowi issued Government Regulation in Lieu of Law (Perppu) No. 2 of 2022 to replace the law, which was later passed into law by the House in March 2023.

Unfortunately, the Omnibus Law was later seen as a hindrance rather than a solution. According to Yusuf Rendy Manilet from CORE Indonesia, the law was ineffective and procedurally flawed, leading to legal uncertainty and a constitutional challenge.

He asserted that rather than streamlining investments, the law created new complications.

“This reflects the core issue of regulation. Because the process was rushed, the law lacks stability,” Yusuf explained.

Similarly, economist Syafruddin Karimi from Andalas University agreed that while the initial intent was to simplify rules and encourage investment, the law created significant legal uncertainty.

“The 2021 Constitutional Court ruling weakened the law’s legal credibility. Legal certainty is key for long-term investments, and constitutional doubts introduce unmanageable risks,” he said.

2. Anti-Extortion Task Force (Saber Pungli)

In October 2016, President Jokowi established the Saber Pungli Task Force via Presidential Regulation No. 87 of 2016 to combat illegal levies that deter investment.

The task force was expected to tackle rampant extortion, both centrally and regionally, that discouraged entrepreneurs from investing.

Chair of Jakarta Chamber of Commerce and Industry (Kadin), Diana Dewi, noted that extortion was particularly prevalent in regional areas, where unauthorized fees were often demanded by various groups, including NGOs.

“We found many extortion practices in regions, unlike Jakarta. They impose costs under the table that hinder business,” she said on Wednesday (Jan 10).

This drove up the cost of doing business and created additional obstacles.

However, the task force proved ineffective, as extortion remained widespread. A recent scandal involved the Cilegon Chamber of Commerce, where Chairman Muhammad Salim and two members allegedly intimidated and coerced PT Chengda Engineering Co Ltd. into awarding a Rp5 trillion project without tender.

They were later named as suspects.

Following this, President Prabowo Subianto officially disbanded the task force through Presidential Regulation No. 49/2025, which revoked Perpres No. 87/2016.

“The 2016 regulation is hereby revoked and declared no longer valid,” reads Article 1 of the new regulation.

The disbanding reflected the assessment that the task force was no longer effective.

3. Investment Licensing Through OSS

The Online Single Submission (OSS) system, managed by the Ministry of Investment/BKPM, was introduced in 2018 to digitize and streamline business licensing.

But according to Andalas University economist Syafruddin Karimi, OSS has not significantly resolved real-world licensing hurdles.

He described OSS as a promising reform idea, yet constrained by the inertia of outdated bureaucratic practices.

“The government placed too much faith in digitalization as a magic fix, without addressing underlying issues in processes, institutions, and bureaucratic behavior,” he said.

He argued that to make OSS a true driver of economic growth, what’s needed is not just a digital platform, but a comprehensive overhaul of licensing governance from start to finish.