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Indonesia receives record high FDI

Publication Date : 23-10-2012


Indonesia’s investment shows no sign of slowing down as the country has booked another record high of realised investments in the third quarter this year, thanks to its economic resilience that has provided incentives for both domestic and foreign investors to establish or expand their businesses.

Realised investments in Indonesia topped 81.8 trillion rupiah (US$8.52 billion) in the third quarter, growing 25 per cent compared to a year earlier, according to the Investment Coordinating Board (BKPM).

“The fact that India and China are slowing down pushes investments in Indonesia, the only country with stable growth. This is why we are called the least unattractive country in the middle of global slowdown,” BKPM chairman M. Chatib Basri told reporters yesterday in Jakarta.

Foreign investors still dominate Indonesia’s investment, with foreign direct investment (FDI) reaching 56.6 trillion rupiah, or 69 per cent of total realised investment. The figure grew 22 per cent compared to a year earlier.

Singaporean companies accounted for the largest share, realising $1.5 billion of investments, or 24 per cent of total FDI realised in Indonesia, trailed by the UK ($0.7 billion), Japan ($0.7 billion), Taiwan ($0.6 billion) and Mauritius ($0.6 billion).

Foreign investors still opted for the natural resources and commodities sector, with realised investments in the mining industry topping $3.2 billion, or 17.3 per cent of total FDI realisation, followed by the chemical and pharmaceutical industry with $2.5 billion and the telecommunication industry with $1.9 billion.

“Looking at how our investment trend has progressed, I believe that our economic growth will be able to reach 6.3 to 6.4 per cent this year. Investments can offset the decline in exports that has affected our trade sector,” the BKPM chairman said.

Analysts have expected investments to become the one of the major drivers of Indonesia’s economic growth, besides its strong domestic consumption stemming from the country’s population of 240 million.

This month, the Asian Development Bank (ADB) released a report predicting investment to contribute approximately 40 per cent of Indonesia’s economic growth next year — estimated by the Manila-based organisation at 6.6 per cent — as industries expand their business here to tap into the country’s strong purchasing power stemming from its growing middle-classes.

The sunny forecast on Indonesia’s investment sector was also attributed by the ADB to the fact that Indonesia successfully carried out many reform programmes and investor-friendly policies that had helped improve its image among both foreign and domestic investors.

“Some observers claim that Indonesia’s economic reform programmes are progressing slowly, but our reform programmes in the investment sector are actually going in the right direction,” ADB senior country economist Edimon Ginting told The Jakarta Post on Monday.

“Just look at the numbers and you’ll see that investors actually have responded positively toward our reform programmes,” he added.

Edimon argued that it was a matter of time before Indonesia’s credit rating was upgraded by Standard & Poor’s (S&P), the only member of the so-called “Big Three” rating agencies that is yet to give the country an investment grade status.

S&P said in a statement released last week that Indonesia still faced several policy constraints that hampered it in its efforts to earn a credit rating upgrade. The rating agency, however, argued that there was more upward than downward pressure on the country in receiving an investment-grade status, a situation that would guarantee more investment flocking into the country.

From January to September this year, Indonesia accumulated 229.9 trillion rupiah of realised investments, slightly less than its annual target of 283.5 trillion rupiah.

This year, Chatib believed that Southeast Asia’s largest economy was set for a historic achievement: recording more than 300 trillion rupiah of realised investments in a year.

"Initially, people didn’t believe that such a figure could be achieved, but looking at our present development it’s [300 trillion rupiah of realised investments] very likely to be achieved."

*US$1=9,600 rupiah


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