Services Sector to Boost Indonesian Economy

By Francezka Nangoy | Source: The Jakarta Globe
Indonesia can do more to promote the services sector, which in turn can help propel growth in the nation’s economy, a government official said on Friday.

Chatib Basri, chairman of Indonesia’s Investment Coordinating Board (BKPM), said in a meeting with journalists in Surabaya on Friday that there was big potential in the services sectors, such as hospitality, restaurant and telecommunications.

Investment in hotels alone surged by 300 percent to 2012 from 2011, and new businesses continue to emerge, such as the potential to care for the elderly who travel from abroad, Chatib said ahead of the Asia-Pacific Economic Cooperation meeting this weekend.

“Senior citizens from South Korea and Japan visit Bali in the winter time [in their countries], sometimes bringing along their doctors. It’s almost like a holiday nursing home,” he said.

In 2012, total foreign and domestic investment in Indonesia rose 25 percent to Rp 313.2 trillion ($33 billion). However, the services sector’s contribution was less than 5 percent of total investment, according to Chatib. Services accounted for about 11 percent of economic activity last year.

Sofjan Wanandi, chairman of the Indonesian Employers’ Association (Apindo), said that Indonesia was lagging behind in the services industries but there was still a lot of room for improvement, including amending regulatory measures.

Improvement in the services sector can come from other related industries.

An example, Chatib said, would be using mobile phones to do online banking, which can help in the expansion of banking activities.

“I can imagine that these things in the telecommunication sectors can be used as inputs to the banking industry,” he said.

Chatib said that as a government body, one of BKPM’s priorities was trying to revise the negative investment list, which was last amended in 2010. That list is composed of sectors that are banned from foreign investment or restricted to a certain percentage of foreign ownership such as 5 percent of an entity. One sector in the negative list is the culture and tourism industry, which includes museum operations.

He refrained from mentioning any particular sector that may be revised, but added that the aim was to make Indonesia more investment-friendly.

“I cannot say [how much it can grow], because it depends on the implementation of changes in the negative list,” Chatib said.

Last year, the issue of investment restriction in movie theaters came up, after a unit of South Korea’s Lotte Group planned to invest in chains of cinemas but was countered by barriers in the negative list.

Foreign ownership in movie theaters is limited at 67 percent.