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Savings and Investment in Indonesia

Author

Listed:
  • Andriansyah, Andriansyah

Abstract

The main objective of this paper is to understand domestic savings and investment in Indonesia. The level of savings in Indonesia is relatively high by international standard. However, the savings through banking sector are more dominant than non-banking savings. This leads to the scarcity of long-term savings which are essential for long-term investment, especially in infrastructure, that ultimately benefit growth and development. One of the keys to promote long-term savings is through mandatory savings. At the same time, institutional investors such as insurance companies and pension funds must be encouraged to invest in long-term instruments. The role of financial sector plays a crucial role in providing such instruments. Therefore, policy recommendations must be directed to fiscal policy through tax incentives for stimulating long-term saving and investment; social welfare policy for encouraging contractual saving and developing long-term domestic institutional investors; financial market deregulation for increasing access to financial services and increasing competition among financial service providers; and coordination among sectors.

Suggested Citation

  • Andriansyah, Andriansyah, 2016. "Savings and Investment in Indonesia," MPRA Paper 105254, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:105254
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    References listed on IDEAS

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    More about this item

    Keywords

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    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

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