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FDI grows on investors' hopes for new govt
Indonesia maintained strong foreign direct investment (FDI) growth in the third quarter of this year as investors remained upbeat about the countryâs long-term outlook following president-elect Joko âJokowiâ Widodoâs announcement of programs to promote growth and reform in Southeast Asiaâs largest economy
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ndonesia maintained strong foreign direct investment (FDI) growth in the third quarter of this year as investors remained upbeat about the country's long-term outlook following president-elect Joko 'Jokowi' Widodo's announcement of programs to promote growth and reform in Southeast Asia's largest economy.
The Investment Coordinating Board (BKPM) reported on Friday that total FDI realization in the third quarter grew 16.9 percent year-on-year to reach Rp 78.3 trillion (US$6.4 billion).
Meanwhile, domestic direct investment (DDI) grew 24.2 percent to hit Rp 41.6 trillion. The combination of FDI and DDI took total realized investments from July to September to Rp 119.9 trillion, the highest level ever recorded.
Based on his interaction with foreign investors, BKPM Chairman Mahendra Siregar said many investors expressed confidence in the prospect of economic reform under Jokowi, who is regarded as being business-friendly.
'The new government and its planned programs are seen as giving new hope,' he told reporters at his Jakarta office. Jokowi will be installed as Indonesia's seventh president on Oct. 20.
For Indonesia, the robust realized investment growth was a positive achievement in a world where countries had to cope with 'the new normal' of slower global growth, Mahendra said.
'FDI is a permanent source of funds to support economic growth, unlike portfolio flows, where the funds can enter or leave the country in a matter of minutes,' he explained.
In the third quarter, the sectors that attracted the most FDI were transportation, warehousing and telecommunications, which jointly accounted for $1.1 billion of FDI, with 79 projects realized, according to BKPM data.
Foreign investors realized their investments mostly in Jakarta ($1.48 billion of realized FDI), followed by West Java ($1.43 billion), Central Sulawesi ($1 billion) and East Java ($498.1 million). The dollar amounts were based on BKPM's rupiah assumption of 10,500 per dollar, according to the 2014 state budget.
- FDI grew 16.9% to Rp 78.3t, while domestic investment rose 24.2% to Rp 41.6t in Q3
- Transportation, warehousing, telco most attractive sectors in Q3
- Overall investment could grow 18% next year: BKPM chairman
Meanwhile, domestic investors poured most of their money into East Java, which, at Rp 11.4 trillion of realized DDI, was way ahead of East Kalimantan in second place with Rp 4 trillion of investments. 'At the regional level, I've noticed that the money tends to go to regions that provide a good quality of service to investors,' Mahendra said.
Total realized investments are expected to reach Rp 456 trillion this year, a 15 percent increase on last year. As of September, the country had realized Rp 342 trillion of investments.
Given the bright prospects, the new administration could aim for around 18 percent growth in total realized investments next year, according to Mahendra.
FDI is regarded as a key feature of economic growth in the country, where investments account for 30 percent of the gross domestic product (GDP) ' the second-largest growth driver after consumer spending ' as well as to support the balance of payments, which is under pressure from the current-account deficit.
In the second quarter, Indonesia recorded a $4.3-billion surplus in its balance of payments, as the $9.1-billion deficit in the current account was offset by a $14.5-billion surplus in the capital account, supported by inflows from foreign direct and portfolio investments.
