The Investment Coordinating Board (BKPM) chairman Thomas Lembong expects US$5-10 billion investment in Indonesia (RI) in the next 1-2 years after ratings agency Standard & Poor’s (S&P) upgraded Indonesia’s credit rating. “It’s equal to Rp70-130 trillion investment in Indonesia thanks to S&P upgrade,” he said yesterday.
According to Thomas, the rating upgrade will not have an immediate impact. Investors would need time to learn the best avenues to invest in Indonesia. “Be it bonds, shares, etc. Nevertheless, in the next 12-24 months, the impact will be significant.”
The most important thing is, Thomas said, the government must keep the momentum going. “We have to exploit such encouraging development to continue to boost reforms that could bring more upgrades,” he said.
Thomas said that the government will not be satisfied with the S&P investment grade (BBB-) with a stable outlook. “Eventually, we want to move to BBB, BBB+, A-, A and so on,” he noted.
S&P last week upgraded Indonesia’s credit rating to investment grade (BBB-) with a stable outlook. The agency upgraded the rating on the basis of lower fiscal risks as the government budgeting becomes more realistic.
S&P sees that the policy could contain larger deficit and reduce the risk of higher debt to GDP ratio. The agency also predicts improvement in state revenue as a result of the tax amnesty program and controlled fiscal expenditure.