Indonesia's Q1 FDI Growth at 20.2% y/y, Focuses on Downstream Investment

MACROECONOMICS - JAKARTA. Indonesia's foreign direct investment (FDI) rose 20.2% annually in the January-March period in rupiah terms, with the base metal industry the biggest recipient amid efforts to boost investment in processed minerals.

The first quarter FDI, which excludes investment in the banking and oil and gas sectors, was worth 177 trillion rupiah, ministry data showed.

Based on the ministry's rupiah-dollar conversion, it was equivalent to about $11.96 billion. FDI rose 43.3% in the previous quarter.

"FDI to the manufacturing sector, especially to the metal industry in Q1 ranked first ...this shows the government policy to give value add on natural resources had a positive impact," Investment Minister Bahlil Lahadalia said in a statement.

Indonesia is due to ban exports of raw minerals like copper and bauxite from June as part of efforts to attract investment into its metals processing industry and boost the value of its exports.

Singapore, Hong Kong, and China provided the largest share of the FDI in the first quarter with investment of $4.3 billion, $1.5 billion and $1.2 billion, respectively, according to the ministry's data.

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The ministry has set a target to draw 1,400 trillion rupiah ($95.5 billion) of investment this year from domestic and foreign sources.

At a news conference, Bahlil said challenges to achieve the investment target among others were a global economic slowdown and ensuring political stability ahead of an election next year, when Indonesia will choose a new president and legislators.

He also said Indonesia will continue to focus on drawing investment in the next three quarters to processing industries, including natural resources, part of its goal to be among the world's top five countries in terms of gross domestic product.

Indonesia will also strengthen its partnership with Australia in developing an electric vehicle battery ecosystem, he said, as it has abundant resources of lithium, a material used in the production of EV batteries.