Foreign Investment in Indonesia Up 32%, With Property Leading Way

By webadmin on 11:37 pm Oct 31, 2010
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Shirley Christie

Indonesia. Indonesia saw foreign direct investment jump 32 percent to Rp 111.1 trillion ($12.4 billion), excluding oil and gas, and banking, in the first nine months of the year, with the property sector attracting the most investment.

“The investment realization figures are very promising,” Gita Wirjawan, chairman of the Investment Coordinating Board (BKPM), said at the board’s headquarters in Jakarta on Sunday.

He said the increase had been supported by improvements in investment regulations and better coordination between the central and regional governments.

“If we continue to work hard to further enhance these synergies, I firmly believe this will continually be reflected in the investment figures,” he said.

Eric Sugandi, an economist from Standard Chartered in Jakarta, backed Gita’s assessment. “In 2009, investors might have had doubts, but this year they are confident,” he said

The BKPM on Sunday announced investment figures from foreign and domestic investors. Foreign and domestic investment came to Rp 149.8 trillion this year through September.

Among notable recipients of foreign funding were the real estate, industrial estate and office- building sector, with $800 million. It was followed by mining ($700 million; 88 projects); transportation, storage and telecommunications ($600 million); foodstuffs ($400 million); and plantations ($300 million).

The BKPM also released data on domestic investment showing it had risen 36.5 percent to Rp 38.5 trillion from a year earlier.

The top five sectors were plantations (Rp 4.5 trillion); transportation, storage and telecommunications (Rp 3.1 trillion); foodstuffs (Rp 2.8 trillion); chemicals and pharmaceuticals (Rp 1.4 trillion); and other services (Rp 1.1 trillion).

“Besides a significant increase in the total investment figures, two positive outcomes must be underlined,” Gita said. “The first is the increase in domestic investment, and the second an increase in investments outside of Java.”

Investments outside Java, Indonesia’s most populous island and economic hub, contributed 37.7 percent, or Rp 21.4 trillion, of the nation’s total. Regional investment more than tripled from Rp 5.9 trillion a year earlier.

Foreign investors have been drawn by the country’s resilience in the face of the global economic downturn. Indonesia’ strong domestic market, paired with a lack of reliance on exports, saw the economy grow 4.5 percent last year as many of its regional rivals were mired in recession.

Indonesia’s relatively high key interest rate of 6.5 percent has also drawn attention from investors seeking higher returns. Growing political stability and the prospect of gaining investment-grade ratings for sovereign debt have also reassured investors.

“Considering the realization through the third quarter of 2010, we are sure that the target of Rp 160.1 trillion is going to be accomplished. We might even surpass Rp 180 trillion by the end of year,” said the BKPM’s deputy chairman, M Yusan.

According to Fauzi Ichsan, another Standard Chartered economist, the key to making Indonesia more attractive is improving infrastructure, including roadways, power plants and harbors.

Beginning this year, investment figures have been gathered by a data collection agency, Investment Activity Reports (LKPM), which requires all companies to report investment realizations every quarter.

Last year, the calculation method was based on the issuance of permanent business licenses, under which companies reported investment only after the project was completed. The BKPM said the 2009 and 2010 figures were not directly comparable as a result.

The BKPM data excluded investment in the oil and gas sector, banking, non-banking financial institutions and leasing.