Foreign Investment in Indonesia
Foreign investment in Indonesia remains one of the strongest in Asia and Southeast Asia in particular, and the ease of doing business has attracted many investors. The country’s GDP growth during the first quarter of 2017 as well as rebounded government expenditure and emerging export are among important factors to determine FDI ranks.
Foreign Investment in Indonesia Realization 2017
The government continues to make improvements to achieve investment realization target by the end of the fiscal year 2017. Currently, it is reported that the number of investment in the country stands at 24.4% of the 2017 target by the end of the first quarter. Indonesia Investment Coordinating Board (BKPM) reports a significant amount of US $12.5 billion from the total target of USD 678.8 trillion. This percentage increased by 13.2% of the investment made in the same period last year.
The latest report of BKPM shows even improvement of foreign investment in Indonesia realization is subjected to 5 major sectors. In total, both FDI and DDI numbers show an increase of 12.7% in realization during the second quarter of 2017, compared to the same period last year. Thomas Lembong, chief of BKPM, states that this time, Indonesia’s investment has generated more than 345.000 job vacancies, making the nation’s investment target highly achievable.
To encourage the sound investment climate and ease of doing business, the Government of Indonesia (GOI) offers a series of Economic Packages that is aimed to provide easiness, acceleration, and promotes certainty to the investors to get a license. The DDI number itself stands at Rp61.0 trillion in realization or increased by 16.9%. Meanwhile, the FDI realization grew by 10.6%, or equal to Rp109.9 trillion during the second quarter of 2017, compared to Rp99.4 trillion in the same period last year. Both DDI and FDI realizations also absorb 104.225 and 241.068 of workers, respectively. This number, according to BKPM, generates a positive outcome for the government to establish more job opportunities.
Foreign investment in Indonesia is dominated by five major sectors, as stated previously. Those factors are metal, machinery, and electronic generating USD 1.1 billion, mining industry generating USD 1 billion, electricity, gas, and water supply industry generating USD 1 billion, chemical, and pharmaceutical sector generating USD 0.8 billion, and food industry generating USD 0.7 billion. When combined, the five sectors are contributing as much as 46.4% of the total foreign investment in the country.
Not only does generate more revenue in numbers, but this year's FDI also contributes to equitable development. More investment outside Java has been realized, which amounting to Rp79.7 trillion or equal to 46.6% from the total investment. This figure shows positive growth for the development outside Java, compared to 45.9% during the second quarter in 2016.
There are five leading countries to make foreign investment in Indonesia. The highest-bidding investor is Singapore, amounting USD 1.6 billion, followed by Japan with USD 1.4 billion, China with USD 1.3 billion, Hong Kong with USD 0.6 billion, and South Korea with a total investment of USD 0.5 billion.
The interest to make foreign investment in Indonesia shows seemingly stagnant growth due to strengthening Rupiah value. That also empowered by the government’s effort to simplify foreign ownership of some industrial sectors to provide friendlier investment climate.
ABOUT THE AUTHOR: Bimo
Bimo has experience in assignments related to foreign capital investments and corporate restructuring. He is assisting his clients in relation to their companies/affiliates/subsidiaries in Indonesia, as well as establishment of the foreign investment companies and local companies. He also assists his clients in regulatory compliance required, providing legal advice regarding corporate matters, drafting documents/agreements and representation
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.