Indonesia’s Investment Diversity Still Low, Dominated by China, CSIS Says

TEMPO.CO, Jakarta – The Center for Strategic and International Studies (CSIS) said that Indonesia still has some problems in pursuing sustainable trade and investment. The latest CSIS report said the government’s commitment to a green economy is still lacking.

“It seems that Indonesia indeed still has a lot of work to do in terms of transitioning to a greener economy, one of the problems that appear in the areas of trade and investment,” CSIS director Yose Rizal Damuri told Tempo after an event to release the research report on Monday, July 1.

Yose said that sustainable trade and investment are inseparable from the use of clean energy. But so far, he said, the government’s policies and its political will towards clean energy have not demonstrated serious efforts, which can be seen, among other things, in the overlapping regulations between the net-zero emissions target and efforts to use clean energy.

“At the moment, it seems there are still many gaps that need to be addressed. This includes not only investment and trade but also regulations that need improving,” he said.

According to Yose, the transition to green trade and investment is linked to the energy transition. Therefore, he said, there is also a need for more political will – not just jargon in the international world. “We hope for the seriousness of the government and the seriousness of the business community to continue to drive this transition,” Yose said.

Not Diverse Enough

Diversity in investment, especially in the critical minerals and energy sectors, is seen as a way to encourage more environmentally friendly capital efforts.

One effort that can be made to encourage sustainable investment and trade, Yose said, is to try to diversify investment in domestic sectors. According to CSIS findings, Chinese investors currently account for more than 50 percent of investment in Indonesia.

“In critical minerals, we are heavily reliant on China. Diversification will help us go further and create competition for domestic investment partners to achieve sustainable trade,” he said.

Yose added that China’s strong influence on investment in Indonesia has resulted in a weak emphasis on environmental and social aspects. This puts Indonesia in a weak position with few alternatives.

“We should not see China as an obstacle or a negative thing. What we need to do is diversify and improve the current investment governance,” he said.

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