Foreign Direct Investment (FDI) in Indonesia: Growing Role of India
India is increasingly investing in Indonesia. Based on data from Indonesia's Investment Coordinating Board (BKPM), India invested USD $285.4 million in Indonesia in full-year 2017. It is a relatively small amount but it does imply a 418 percent growth rate from USD $55.0 million worth of Indian investment in Indonesia in the preceding year. Thus, India jumped from 23rd to 16th in the ranking of biggest foreign investors in Indonesia.
The latest example is India-based Adani Ports, part of the Adani Group (an integrated infrastructure corporation). The company is set to become the operator of Indonesia's new Cilegon container port (located in the Banten Province). Indonesian Transportation Minister Budi Karya Sumadi said Adani Ports will partner with a local company to operate the Cilegon port. However, he refrained from mentioning the name of the Indonesian partner. But Sumadi did inform that it is a local conglomerate. In this partnership Adani Ports will have a minority interest.
Construction of the Cilegon container port, which will have a capacity of 2 million twenty-foot equivalent units (TEUs), is expected to start in 2018. Sumadi added that investment will be no less than IDR 5 trillion (approx. USD $365 million).
The presence of foreign port operators in Indonesia should lead to healthier competition in the port sector, Sumadi said. This will then boost efficiency and improve the level of services of port operators.
At the 1st India Indonesia Infrastructure Forum (IIIF), held at the start of the week in Jakarta, various infrastructure projects were offered to Indian investors. For example, the Makassar–Parepare railway project, which is part of the Trans-Sulawesi railway network that will connect the entire island of Sulawesi. This project is partially funded by the Indonesian government and should therefore be more appealing to foreign investors. Sumadi also welcomed the idea of seeing Indian investment in Indonesian airports, such as Kuala Namu (North Sumatra), Raden Inten (South Sumatra), Juwata (North Kalimantan), and Komodo (Flores).
Shri Pradeep Kumar Rawat, Ambassador of India to Indonesia, said both countries have a (long and ancient) shared history and form a great pair to partner in the infrastructure development push that is happening in both nations. But he did emphasize that infrastructure projects require plenty of time before investors can see profit, thus regulatory certainty and a conducive investment climate are key to attract foreign investment. Indirectly, Rawat is pointing out that Indonesia needs to do some homework on these matters.
A breakdown of the BKPM data show that most Indian investment in Indonesia in full-year 2017 went into the wood processing industry (USD $243.1 million), followed by the food and beverage industry (USD $7.12 million), the textile industry (USD $5.43 million), and transportation (USD $2.39).
The biggest Indian investors in Indonesia are the Tata Group, Essar Group, Coal India Limited, Bharat Heavy Electricals, and Steel Authority of India Limited.
Indian Foreign Direct Investment (FDI) in Indonesia:
| 2016 | 2017 | |
| Investment (in USD million) |
55.04 | 285.37 |
Source: BKPM