Investment Crucial to Achieving Indonesia’s 8% Growth Target by 2029, Think Tank Says

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JAKARTA, investortrust.id  — Indonesia must double its annual investment to Rp 3,400 trillion ($209 billion) to achieve its ambitious 8% economic growth target by 2029, according to a new analysis by Prasasti Center for Policy Studies, an independent policy think tank.

Research Director Gundy Cahyadi said the current investment level, which stood at Rp 1,700 trillion ($104 billion) in 2024, remains far below the threshold needed for sustained high growth. “We saw investment growth hit around 15% in previous years, but it slowed to about 6% in 2024. That must accelerate to support solid economic expansion,” Gundy said during the launch of Prasasti in Jakarta on Monday, June 30, 2025.

According to projections by the National Development Planning Agency (Bappenas), the government must mobilize a cumulative Rp 13,000 trillion ($800 billion) in investment from 2025 to 2029 to hit its growth target.

“That figure is equivalent to two-thirds of Indonesia’s economy today. To put it in perspective, we need to essentially add an economy the size of Java and Sumatra combined,” he said.

 

Strategic Sectors Hold Untapped Investment Potential

While the gap remains large, Gundy emphasized that Indonesia is not starting from zero. Strategic sectors—such as mineral resources, oil and gas, agriculture, and downstream marketing—already offer investment opportunities worth Rp 9,500 trillion ($586 billion), or around 75% of the national target.

“The challenge is immense, but so is the opportunity. If we can unlock this Rp 9,500 trillion pipeline, we’ll be three-quarters of the way there,” he said.

Gundy also warned that Indonesia’s domestic savings remain insufficient to fund these investments. The country continues to run a savings gap—the difference between investment needs and national savings—averaging minus 0.5% of GDP over the past three years.

“In 2014, the savings gap stood at 3% of GDP. Although it's narrowed, we’re still in deficit. That means foreign investment remains critical,” he said.

Foreign Investment Grows, but Job Creation Lags

Foreign direct investment (FDI) reached $227 billion in 2024, a sixfold increase from 2014. Gundy called this a sign of growing global investor confidence in Indonesia, but noted that the link between investment and job creation has weakened.

“First, the investment-to-jobs ratio is declining. Second, much of the job growth has been in the informal sector, not in formal employment. That’s a serious policy issue,” he said.

“Investment drives industrialization, improves domestic productivity, and should create more and better-quality jobs. But unless we align investment with labor-market policy, we won’t fully capture those benefits,” he added.

Gundy called for “concrete policies” to ensure that investments generate formal sector employment and support Indonesia’s development goals.

Prasasti is a newly launched independent think tank focusing on economic strategy, geopolitical risk, and public policy innovation. It brings together former policymakers, academics, and industry experts to provide data-driven policy recommendations.