Direct Investment in Indonesia Rebounds in Second Quarter 2017
The Investment Coordinating Board of Indonesia (in Indonesian: Badan Koordinasi Penanaman Modal, or BKPM) reported that total direct investment realization in Indonesia was recorded at IDR 170.9 trillion in the second quarter of 2017. This constitutes a 12.7 percent growth pace from IDR 151.6 trillion worth of total direct investment in the same quarter one year earlier. Thomas Lembong, Head of BKPM, said investment realization managed to absorb 345,323 Indonesian workers in Q2-2017.
Lembong expressed he is pleased with the Q2-2017 results as they provide hope that the BKPM's investment target of IDR 679.8 trillion will be achieved in full-year 2017.
Direct domestic investment (DDI) increased by 16.9 percent year-on-year (y/y) to IDR 61.0 trillion from IDR 52.2 trillion in the same period last year. Meanwhile, the realization of foreign direct investment (FDI) in Indonesia reached IDR 109.9 trillion, up 10.6 percent (y/y) from IDR 99.4 trillion in Q2-2016. In US dollar terms, FDI realization rose by 15.5 percent (y/y) to USD $8.2 billion in Q2-2017. Examples of foreign investors that entered (or expanded their business) in Indonesia are Mitsubishi, SAIC General Motors Wuling and Krakatau Osaka Steel.
The biggest foreign investor in Indonesia in Q2-2017 was Singapore (USD $1.6 billion), followed by Japan (USD $1.4 billion) and China (USD $1.3 billion). The top three sectors in which foreigners invested were (1) metal, machinery, and electronic industry (USD $1.1 billion), (2) mining (USD $1.0 billion), and (3) electricity, gas, and water supply (USD $0.99 billion).
Growth of FDI in Indonesia in Q2-2017 was much better compared to the bleak growth pace of 0.9 percent (in rupiah terms) or 6 percent (in US dollar terms) in the preceding quarter. This is most likely the result of easing religious and ethnic tensions in Indonesian society. In Q4-2016 and Q1-2017 Indonesia (particularly Jakarta) was plagued by heavy tensions stemming from the Jakarta gubernatorial election and blasphemy case of former Jakarta governor Ahok.
Lembong added that he is somewhat concerned that investment may decline in the second half because commodity prices could soften in the remainder of the year.
View all Q2-2017 investment data for Indonesia
It is also believed that Indonesian President Joko Widodo's move last year to open various business sectors to foreign investors has helped to boost FDI in Indonesia. Next month the Indonesian government may again ease foreign ownership restrictions on specific industries.
Two remarks:
• The investment data exclude investment in oil and gas, banking, non-bank financial institutions, insurance, leasing, and home industry.
• The BKPM uses a currency rate of USD $1 = IDR 13,300 (as set in the 2017 State Budget).