Foreign Direct Investment into Indonesia Grows 19.2% in 2015

In US dollar terms, FDI into Indonesia rose to USD $29.27 billion in full-year 2015, up 2.6 percent from USD $28.53 billion in the preceding year. It is important to note that the BKPM uses the rupiah exchange rate that was set in the 2015 State Budget (IDR 12,500 per US dollar). This rate is much stronger than the current rupiah rate. Today Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) was at IDR 13,899 per US dollar.

Total direct investment (FDI + domestic direct investment) reached IDR 545.4 trillion in 2015, up 17.8 percent (y/y), hence achieving the BKPM's target of generating IDR 519.5 trillion worth of investment in 2015 (these figures exclude investment in banking, oil and gas sector). BKPM Chairman Franky Sibarani expressed his contentment to see the agency's investment target being achieved amid ongoing global economic uncertainty. Moreover, investment in Indonesia's manufacturing industry rose 43.3 percent (y/y). As Indonesia needs to ramp up its manufacturing industry in order to reduce its dependence on volatile commodities for its export performance, the steep jump in investment in manufacturing is a positive development.

Regarding FDI in Indonesia in full-year 2015, Singapore was the leading investor, investing USD $5.9 billion, followed by Malaysia (USD $3.1 billion), Japan (USD $2.9 billion), the Netherlands (USD $1.3 billion), and South Korea (USD $1.2 billion). The biggest beneficiaries of FDI in 2015 were mining, transportation, telecommunication and the mineral-processing sector. Sibarani added that investment from China grew sharply (especially for smelters and plants in Kalimantan and Sulawesi). However, it is not uncommon for Chinese companies to invest through their Singapore-based subsidiaries.

The continuously rising investment figures (see tables below) over the past couple of years give rise to optimism that Indonesia can expect to see more investment in the years ahead, particularly as the Indonesian government has been unveiling a series of economic stimulus packages since September 2015. With these packages the central government aims to attract more investment by deregulation and by offering fiscal incentives to (potential) investors. The BKPM targets investment realization in Indonesia to grow to IDR 594.8 trillion in 2016. In the soon-to-be-released ninth economic stimulus package the central government is expected to allow bigger foreign ownership in sectors including cinema/film, tourism, leisure, trade, e-commerce, sugar and rubber industries, minimarkets and department stores.

Foreign and Domestic Investment in Indonesia (in IDR trillion):

	2014				2015
	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Domestic Direct Investment	34.6	38.2	41.6	41.7	42.5	42.9	47.8	46.2
Foreign Direct Investment	72.0	78.0	78.3	78.7	82.1	92.2	92.5	99.2
Total Investment	106.6	116.2	119.9	120.4	124.6	135.1	140.3	145.4

 

	2011				2012				2013
	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Domestic Direct Investment	14.1	18.9	19.0	24.0	19.7	20.8	25.2	27.5	27.5	33.1	33.5	34.1
Foreign Direct Investment	39.5	43.1	46.5	46.2	51.5	56.1	56.6	65.5	65.5	66.7	67.0	71.2
Total Investment	53.6	62.0	65.5	70.2	71.2	76.9	81.8	83.3	93.0	99.8	100.5	105.3

^{Source: Indonesia Investment Coordinating Board (BKPM)}

Sibarani added that investment realization in Indonesia in 2015 provided employment to an additional 1.44 million people. This year he would like to see an additional two million people obtaining employment from foreign and domestic investment.

The island of Java - Indonesia's most populous island - remains the biggest receiver of investment. In 2015 this island received IDR 296.7 trillion worth of investment, approximately 54 percent of total investment in Indonesia, whereas in 2014 Java obtained 57 percent of total foreign and domestic investment. From the perspective of equality between the western and eastern regions of Indonesia it is good to see a more even distribution between the regions. The BKPM would like to see Java receive 51 percent of total investment in 2016.

Investment in Indonesia per Region in 2015:

Region	Investment Value	% of total
Java	IDR 296.7 trillion	54.5%
Kalimantan	IDR 93.0 trillion	17.1%
Sumatra	IDR 84.4 trillion	15.5%
Sulawesi	IDR 33.2 trillion	6.1%
Maluku & Papua	IDR 19.4 trillion	3.5%
Bali & Nusa Tenggara	IDR 18.7 trillion	3.4%
Indonesia	IDR 545.4 trillion	100%

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