The Investment Coordinating Board (BKPM) said on Friday that escalating political tensions in the South China Sea would not significantly impact the investment climate in the country.

The disputed sea, through which more than US$5 trillion in global trade passes each year, has become a contentious issue among Southeast Asian nations, including Indonesia.

China claims most of the sea, but ASEAN members Brunei, Malaysia, the Philippines and Vietnam all have rival claims. China is adamantly opposed to an ASEAN stand on the South China Sea, preferring to deal with the disputed claims on a bilateral basis.

Although it is not a claimant state in the South China Sea, Indonesia has been looking to have a bigger role in resolving the ongoing dispute, as it showed during the recent ASEAN Ministerial Meeting when it successfully convinced other fellow members to take a clear common stance on the dispute.

Speaking at a press briefing on Friday, BKPM chief Thomas Lembong said the dispute would not affect foreign investment in the country, particularly investment coming from China.

“I’m very familiar with the progress of this dispute but so far as I’ve seen, there hasn’t been any impact on our investment climate,” he said.

The agency data shows that realized foreign investment from China increased by 533 percent year-on-year (yoy) to $1 billion in the January-June period compared to the $160.2 million recorded in the corresponding period of last year.

The figure made mainland China Indonesia’s fourth biggest investor in the period, just behind China’s special administrative region of Hong Kong, which invested a total of $1.1 billion.

Singapore still tops the list with $4.9 billion in realized investment, up 108 percent yoy from the $2.3 billion invested in the first semester of last year. Japan, meanwhile, comes second with $2.9 billion in realized investment.

However, Thomas remains concerned about the annual Rp 15 billion ($1.07 million) trade deficit between China and Indonesia and hopes the bamboo country will balance the deficit with more investment.

“The trade deficit with China is very dangerous so it should be balanced with more investment or [Chinese] tourists [coming in],” he said.

During the conference, the BKPM announced that realized investment was on track with Rp 298.1 trillion in realized investment in the first semester, 50.1 percent of the targeted Rp 594.8 trillion by the year’s end.

The interesting part, according to the BKPM, is that the growth rate for domestic investment has outpaced its foreign counterpart, though the value of the latter still dominates.

Domestic investment increased by 20 percent to Rp 102.6 trillion while foreign investment increased by 12.3 percent to Rp 195.5 trillion.

“The faster pace for realized local investment is very important. It indicates improved confidence from locals that will also boost the confidence of foreigners too,” Thomas remarked.

BKPM’s deputy director of investment monitoring and implementation, Azhar Lubis, noted that the processing industry was mushrooming outside of Java.

Local investors are also keen on investing in warehouses, telecommunications, agriculture and non-metal minerals, while foreign investors are eager to put money into machinery, electronics, chemicals, transportation equipment and food, among others.

Thomas underlined that he wanted to improve food and its supply chains. The former trade minister is aware of high food prices in the country caused by inefficient supply chains.

“One of my desires is to boost investment in the food, processing and supply chain industries. We need more warehouses, modern abattoirs and rice mills,” he said.

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