Direct Investment Realization in Indonesia Slides in Q2-2020 amid COVID-19 Crisis
Based on the latest data from the Indonesia Investment Coordinating Board (BKPM), total investment realization in Indonesia fell 4.3 percent year-on-year (y/y) in the second quarter of 2020 (these data do not include investment in the banking and oil and gas sectors). The decline is attributed to the COVID-19 crisis that has paralyzed the global and domestic economies.
A 4.3 percent decline in investment in Q2-2020 actually seems not that bad though. For comparison, car sales or foreign tourist arrivals in Indonesia plummeted around 90 percent. Thus, it seems relatively few private sector investors walked away from their investment commitments or intentions.
In that context, it is interesting to mention a survey that was conducted by the Japan External Trade Organization (JETRO). This survey, which involves the input of more than 350 Japanese company executives in Indonesia, showed that around 69 percent of respondents remain confident about future investment strategies in Indonesia. They regard the COVID-19 pandemic as a temporary hiccup only, and are confident that consumption will return somewhere in the future. Meanwhile, only 15 percent of respondents indicated that they intend to cut future investment due to the COVID-19 crisis.
The input of Japanese company executives is important because Japan is the fourth-biggest investor in Indonesia (after Singapore, Hong Kong, and China).
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