FDI Continues to Grow on Positive Outlook of [Indonesian] Govt

May 4, 2015 at 10:20

A worker uses the tapping process to separate nickel ore from other elements at the nickel processing plant owned by Vale Indonesia in Sorowako of Indonesia’s South Sulawesi Province in this March 1, 2012 file photo. (Reuters Photo/Yusuf Ahmad)

Jakarta. Foreign direct investment realization in Indonesia maintained positive growth in the first quarter, with investors taking it as a cue for an optimistic outlook on the back of government reform promises.

Foreign direct investment — excluding banking and oil and gas — rose 14 percent to Rp 82 trillion ($6.3 billion) in the January-March period, according to data from Indonesia’s Investment Coordinating Board (BKPM) on Tuesday.

FDI made up 66 percent of total investment, which increased 17 percent to Rp 125 trillion. Investment by local companies climbed 23 percent to Rp 42.5 trillion, the data showed.

“[The growth] doesn’t sound surprising. There was a lot of optimism because of the change in government. Companies have responded well, by and large,” Lin Neumann, managing director of the American Chamber of Commerce in Indonesia, said on Tuesday.

“We’ve seen positive signs [from the government] as we’ve been engaged in a series of dialogues with the ministries. The door is open for dialogue and that’s encouraging.”

President Joko Widodo has pledged to transform investment climate in the country with promises of massive infrastructure investment and development across the country, such as plans of 24 new deep sea ports and 35 gigawatts of additional power generation.

The president also streamlined investment processes in the country through a one-door licensing service, which was launched by the BKPM in January.

Companies from the US undertook 42 projects worth nearly $300 million in the first three months, contributing to 4.4 percent of total investments, data from BKPM showed.

Singapore led foreign investments with $1.23 billion in investment — or 18 percent of the total FDI — followed by Japan at $1.21 billion and South Korea at $634 million.

“We’ve reached roughly 24 percent of our year-end target in this first quarter,” said BKPM chief Franky Sibarani during a press conference in Jakarta on Tuesday.

“For the second quarter, we hope that growth could reach more than 16 percent since there’s typically more growth in the subsequent quarter,” he added.

BKPM aims to attract up to Rp 519.5 trillion in total investments into Indonesia, up 12 percent from last year’s realization at Rp 463.1 trillion.

The government is banking on investment, which makes up roughly 31 percent of the country’s economy, to boost growth by 5.7 percent this year.

Still, the persistent depreciation of the rupiah, if it’s not managed, could eventually take a toll on investor sentiment in the rest of the year, Standard Chartered economist Eric Sugandi said.

The rupiah has been declining by 4.3 percent since the beginning of the year, according to data from Bank Indonesia.

GlobeAsia