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Crisis Seen in Foreign Investment in Indonesia
Ardian Wibisono | November 24, 2009

Women selling produce at a traditional floating market on the Martapura River near Lok Baintan village, South Kalimantan. Such markets are nearly extinct. (Photo: Binsar Bakkara, AP) Women selling produce at a traditional floating market on the Martapura River near Lok Baintan village, South Kalimantan. Such markets are nearly extinct. (Photo: Binsar Bakkara, AP)
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Combined foreign and domestic investment during the first 10 months of this year fell 13.8 percent from the same period last year due to the global economic crisis, the new head of the Investment Coordinating Board told a House of Representatives commission on Monday.

Speaking on his first day in the job, Gita Wirjawan told House Commission VI, which oversees trade and investment, that the domestic economy had escaped from the crisis relatively unscathed.

To illustrate the point, Gita noted that domestic investment more than doubled during the first 10 months of the year compared with the same period last year — from Rp 15.88 trillion to Rp 32.47 trillion.

However, foreign direct investment plunged almost 29 percent to Rp 89.28 trillion in the first 10 months, compared with the same period in 2008, he said.

Total foreign and direct investment was Rp 121.75 trillion.

“Foreign direct investment was down due to the global crisis. However, we are seeing the appetite for investment begin to pick up in line with the global recovery,” Gita said.

“We predict that full-year investment could reach aboutRp 150 trillion,” he added. Last year investment totaled Rp 161.2 trillion at today’s exchange rate.

In addition, proposed investment also had declined 18.8 percent to Rp 321.07 trillion as of the end of October compared with the same period last year, according to data supplied by the investment board, known as the BKPM.

Despite the difficulties attracting overseas investment this year, Paulus Irwan Sutisna, Citibank Indonesia’s director for transnational corporate investment, said international firms were regaining confidence in Indonesia as a place to invest.

“We have several companies seeking additional loan facilities for expansion here. Some of the companies are planning to make Indonesia their export base for the regional market,” he said.

President Susilo Bambang Yudhoyono has said the country will need an average of Rp 2,000 trillion in new investment — including infrastructure investment and private sector and government spending — each year for the next five years to generate annual growth of 7 percent by 2014.

Gita said that target would be achievable. “The figure is quite realistic, although hard work will be needed,” he said.