Sri Mulyani Vows to Lower Investment Cost

By Editorial Team 13/08/2019
Summary

Luring foreign investments is not as easy as it sounds. Compared to other Southeast Asian countries, the cost of capital investment in Indonesia is relatively higher. The country’s high incremental capital-output ratio (ICOR) shows the underlying problem.

According to the Coordinating Economic Ministry’s data, the Indonesian incremental capital-output ratio keeps increasing, which means the capital ratio needed to manufacture a product keeps getting higher. In 2014, Indonesian ICOR reached 5.5, which was already higher than Philippine (3.7), Malaysia (4.6), and Vietnam (5.2). The number increased in 2018 to 6.3, higher than the average ICOR of many developing countries which was around 3-5.

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