Investment surges despite weak global economy

JAKARTA. The realization of domestic and foreign direct investment (FDI) increased by more than 16 percent last year in spite of the slow recovery in the world economy.

The Investment Coordinating Board (BKPM) reported on Wednesday that total investments realized during the January-December period last year reached a total of Rp 463.1 trillion (US$37.03 billion), a 16.2 percent increase on the figure recorded in the same period last year.

The FDI realization accounted for Rp 307 trillion, which represented a 13.5 percent increase year on year (y-o-y), while domestic direct investment (DDI) rose by 21.8 percent to Rp 156.1 trillion.

BKPM head Franky Sibarani said the sharp increase in foreign investment during the fourth quarter had partly contributed to the sharp increase in FDI amid an improvement in business confidence following the change of government.

In the fourth quarter last year, total realized investment grew 14.3 percent y-o-y to hit Rp 120.4 trillion, compared to Rp 105.3 trillion in the same period in 2013.

This comprised Rp 78.7 trillion in FDI, which rose 9.3 percent yoy, while DDI rose by 22.3 percent to Rp 41.6 trillion.

The amount of FDI continued to rise in the country despite the weak global economy, which had caused a drop in the flow of FDI in emerging markets.

According to the BKPM report, the industrial sector accounted for the largest amount of foreign investment in the fourth quarter last year at $2.9 billion or equal to 42.3 percent of the total FDI. The BKPM data showed that metal-related industries, including machinery and electronics, stood in first place with $9 billion.

Meanwhile, mining came second with $9 billion, followed by construction ($8 billion), the food and beverage sector ($6 billion) as well as crops and plantation ($6 billion).

BKPM data showed that, between January and December in 2014, Singapore topped the foreign investor table with total investments worth $5.8 billion or equal to 20.4 percent of the total FDI.

Meanwhile, Japan came second with a total investment of $2.7 billion, equal to 9.5 percent of total FDI, followed by Malaysia ($1.8 billion, 6.2 percent), Netherlands ($1.7 billion, 6.1 percent) and the UK ($1.6 billion, 5.6 percent).

Singaporean FDI in Indonesia now exceeds that of Japan, both of which in ranked equally in top place in 2013 with total investments worth $4.7 billion each.

BKPM head Franky said the board expected that the total investment in 2015 would increase by about 12 percent to Rp 516.5 trillion, comprising of Rp 343.7 trillion of FDI and Rp 175.8 trillion of DDI.

Bank Danamon economists Anton Hendranata and Dian Ayu Yustina said in their research that reforms made by the BKPM’s commitment to improve the licensing procedures and ease investment bottleneck would encourage more foreign investors to come to Indonesia,

According to them, a significant number of investors have shown interest in investing in prioritized sectors, such as power generation as well as labor-intensive and import-substitute industries.

“As the domestic industry is still very much dependent on imports of raw materials, intermediary inputs of capital goods, these new investments will improve the trade balance and lead to further improvement in the current account deficit,” Anton and Dian said. (Grace D. Amianti)