Indonesia remains sweet spot for global investment amid volatile world economy

The 2016 “Global Investment Trends Monitor” report, issued by the United Nations Conference on Trade and Development (UNCTAD) on October 6, puts Indonesia in ninth position on its list of top prospective host countries for foreign direct investment (FDI) from 2016 to 2018, up from the 14th position in 2014.
The United States is on top of the list, followed by China and India. Meanwhile, Malaysia ranks 10th, teaming up with Indonesia as the only two Southeast Asian countries to make it into the top 10.
“The truth is, developed countries like those in Europe have reached saturation point. So global investors tend to look at opportunities in developing countries like Indonesia,” Danareksa Sekuritas analyst Lucky Bayu Purnomo said.
According to the report, a majority of multinational chief executive officers worldwide expect an upsurge in investment flow to Indonesia’s manufacturing and services sectors.
Rosan P Roeslani, chairman of the Indonesian Chamber of Commerce and Industry (Kadin), said one sector that would benefit from the current situation was consumer goods.
 “It’s going to be an attractive sector, considering the rapid growth of our middle-class population,” he said.
The number of middle-class and affluent consumers in Indonesia is set to increase to 141 million people by 2020, up from 88 million in 2014, according to a Boston Consulting Group survey. This demographic group is defined as possessing at least 50 million rupiah (Bt135,000) in household assets.
Sancoyo Antarikso, consumer-goods manufacturer Unilever Indonesia’s corporate secretary, sees eye-to-eye with Rosan, acknowledging that Indonesia has vast untapped potential.
“The level of consumption per capita in almost every category we work in is still relatively low, hence leaving room for rapid growth in the future,” he said.
Investment Coordinating Board (BKPM) data show that the Indonesian food industry, which plays a key role in the consumer goods sector, obtained US$988.63 million in FDI in the first half and was listed as the fifth-most-preferred sector by foreign investors.
Both Lucky and Rosan said the infrastructure sector would also benefit from FDI inflows, as it had become one of the government’s top priorities to resolve the country’s inefficient logistics system and acute distribution bottlenecks that have seriously hampered economic development.
Indonesia’s infrastructure projects will cost a total of 5.5 quadrillion rupiah by 2019, National Development Planning Agency (Bappenas) data show. Therefore, many companies expect to make a fortune from the government’s growing appetite for infrastructure development.
Publicly listed diversified conglomerate Astra International, for example, has allocated 14 trillion rupiah in its consolidated capital expenditure this year, with almost 40 per cent set to finance projects in the infrastructure, logistics and property sectors.
Astra, which has started to focus on non-automotive businesses because of stagnant growth in its automotive segment, controls five toll-road projects at present. It is also building two power plants in Jepara, Central Java, with total investment of $3.9 billion.
Meanwhile, Daewoo Securities Indonesia stated in August that the United Kingdom’s decision in June to leave the European Union had prompted global central banks worldwide to ease their monetary stance and reduce interest rates further.
That was followed by investors moving their money elsewhere, including to emerging markets like Indonesia, as they sought better returns.
The Jakarta Composite Index, which is the benchmark of the Indonesia Stock Exchange, has soared 16.3 per cent year-to-date, with almost 35 trillion rupiah in foreign funds flowing in.