The flow of foreign direct investment (FDI) into Indonesia increased significantly in the second quarter from the tiny gain in the first three months of 2017, the investment board said on Wednesday (26/07). (Antara Photo/M. N. Kanwa)

Indonesia Attracts More Foreign Direct Investment in Q2

JULY 26, 2017

[Updated at 12:31 p.m. on Wednesday, July 26, 2017]

Jakarta. Indonesia on Wednesday (26/07) reported higher levels of foreign direct investment (FDI) in the second quarter than the first, but the head of the agency seeking to win investors said there remains "a lot to improve".

In April-June, FDI increased 10.6 percent on an annual basis in rupiah terms to 109.9 trillion rupiah and by 15.5 percent in dollar terms to $8.2 billion, the investment board said.

In the first quarter, actual investment increased only 1 percent in rupiah terms from a year earlier and 6 percent in dollar terms.

Statistics from the agency do not include investment in banking or the oil and gas sectors.

Improving the investment climate is a focus for President Joko "Jokowi" Widodo, who is trying to get the annual economic growth rate up to 7 percent, from 5 percent at present.

Last year, Widodo opened up dozens of business sectors to foreign investors in what investment board chairman Thomas Lembong called the country's boldest move in 10 years.

Early this month, the president told Reuters the government will ease foreign ownership restrictions on certain industry sectors again in August. No details have emerged.

Thomas told reporters that Jokowi at a cabinet meeting on Monday "uttered his disappointment about many ministerial decrees that hurt the business climate. This we have to improve."

But he said investment has grown "quite well", with the total boosted by factory completions by Mitsubishi, SAIC General Motors Wuling and Krakatau Osaka Steel, a joint venture of Japan's Osaka Steel and Indonesia's Krakatau Steel.

Second Half Slowdown?

"Investment is growing, but there are still more opportunities... We have a lot to improve," Thomas said.

In the second quarter, Singapore was the biggest source of investment, followed by Japan and China. Base metal, mining and utility sectors attracted the most FDI.

Thomas said he was worried investment would slow in the second half as global commodity prices are seen softening. Indonesia relies heavily on commodities for its exports.

"I'm also worried about the structure of investment, especially the balance between capital-intensive and labor-intensive ones.. An increase in nominal investment does not mean an increase in the income or welfare of the people," he said.

In May, rating agency Standard & Poor's upgraded Indonesia's sovereign ratings to investment grade in May.

S&P said the government had taken effective measures to stabilize public finances, but said Indonesia continued to trail other nations on some governance issues such as control of corruption.