The Investment Coordinating Board (BKPM) is optimistic that Indonesia will remain the darling of overseas investors this year as major global investors shift their business to emerging countries amid economic uncertainty in industrialized nations.

BKPM’s chairman M. Chatib Basri said that with such an encouraging situation, it was unlikely that Indonesia would face difficulties meeting foreign investment targets this year, though some analysts feel that multinational companies will cut their investment amid the uncertainties in the global economy.

The government expects foreign investment (FDI) to be around Rp 270 trillion (US$29 billion) in 2013, up from about Rp 206 trillion in 2012.

 “What many outsiders may not know is that Indonesia has direct investments worth Rp 376 trillion in the pipeline,” the BKPM chairman told The Jakarta Post.

FDI accounts for around 70 percent of the figure, he said, implying that Indonesia could anticipate at least Rp 260 trillion of FDI next year.

Chatib joked that recently he “has been suffering from headaches due to the many investment proposals coming to the office”, both from domestic and overseas investors. Over the last three weeks, there were at least 400 new requests for business permits per day. Normally the BKPM receives around 150 requests each day.

Prevailing global uncertainties have actually benefited Indonesia, as the situation causes investors to turn to emerging economies with such a bleak investment outlook in the US and Europe, said the BKPM chairman.

“Brazil is only growing by 0.6 percent, India has problems with inflation and China is slowing down. If you were an investor looking to invest in emerging economies, where else to invest but here?” he explained.

Thanks to stable growth, Indonesia has stood out as an investment hotspot in the region, attracting record high FDI of Rp 56.6 trillion in the third quarter of this year, 22 percent up compared to a year earlier.

In cumulative terms, Indonesia is on track to meet its yearly FDI target of Rp 206 trillion, with Rp 164.2 trillion realized in the January-September period. FDI realization was Rp 175 trillion in 2011.

Such achievement came against the backdrop of economic slowdown in China and India, which are Indonesia’s main rivals in foreign investment. Official data show that FDI in China fell 5.4 percent in January-October compared to a year earlier, while India the figure plummeted 27 percent in the same period.

Multinational corporations that have invested heavily in Indonesia this year include French-based cosmetics giant L’Oreal, which opened its largest factory in the world in Cikarang, West Java, in an investment worth Rp 1.2 trillion. Meanwhile, Japan-based automaker Toyota and Taiwan-based electronic manufacturer Foxconn announced plans to do business here with investments of Rp 13 trillion and Rp 9.63 trillion, respectively.

“You have large domestic market, dynamic consumption and rising middle class,” World Bank country economist for Indonesia, Ashley Taylor, said when asked about what made the archipelago attractive to overseas investors.

According to Taylor, Indonesia can attract more FDI next year if there is improvement in the price of basic commodities, considering the country is especially well known for resource-based industry.

BKPM data show that mining sector accounts for the largest share of FDI, 17.3 percent of the total in January–September.

BKPM Deputy Chairman Azhar Lubis identified mining, especially mineral-processing, as the most lucrative business for overseas investors next year, given Indonesia’s commitment not to export raw minerals so the country can climb up the value chain.

“Value-added industry still has huge potential waiting to be tapped,” he said. (sat)

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