Indonesia FDI at all-time high

The figure reached 56.1 trillion rupiah (Bt186 billion), up by 30.2 per cent from 39.5 trillion rupiah in the same period last year.

Foreign direct investment made up 70 per cent of total realised investment in the country for the given period, which stood at 79.6 trillion rupiah. Singaporean investors led the pack with investment totalling 7.2 trillion rupiah, followed by American and Australian investors with 6.7 trillion rupiah and 5.7 trillion rupiah respectively.

“Currently, foreign investors see Indonesia as the most profitable country in which to invest their money,” BKPM’s newly appointed chairman M Chatib Basri told reporters at a press briefing.

“Economic uncertainties in the West have made foreign investors turn to emerging economies. However, China is currently seeing slower economic growth, India has to cope with higher inflation, and Vietnam has had uncertainty in its exchange rate, making Indonesia the economy with the most stable outlook and the highest return on investment,” he added.

In the second quarter, China’s economy expanded at 7.6 per cent on a year-on-year basis, the slowest pace in three years. The International Monetary Fund (IMF) said that China “faces significant risks” because of the slowdown, urging the export-reliant economy to boost consumption to propel growth.

India, meanwhile, recorded its slowest economic growth in nine years with 5.3 per cent. 

Analysts said that foreign investors flocked to Indonesia mainly because of its robust annual economic growth, which stood at 6.3 per cent in the first quarter of this year, the second-highest among G-20 members after China.

“Indonesia’s macroeconomic indicators remain positive because its export sector only accounts for 28 per cent of its gross domestic product. China and India, meanwhile, depend heavily on exports, which have been hit the hardest by the current global economic slowdown,” said Ahmad Erani Yustika, an economist at the Institute for Development of Economics and Finance.

Despite saying that the BKPM “would have no problem” in reaching its investment goal of 283.5 trillion rupiah by the end of this year, Yustika warned that the board had relied too heavily on foreign investors, which he argued made the economy vulnerable to external shocks.

“It is considered risky to have 70 per cent of our investment coming from abroad. The safer proportion is at least 60-to-40 [60 per cent foreign investors and 40 per cent domestic investors],” he said, suggesting the BKPM exert additional effort in attracting domestic investors.

Indonesia’s soaring investment numbers could also be attributed to several policies introduced by the government to improve the country’s investment climate, such as tax holidays and tax allowances, which went into effect earlier this year, said Bank Central Asia economist David Sumual.