Foreign Direct Investment Fell Sharply in Q3-2018; Are Foreign Investors Losing Confidence in Indonesia?
The legislative and presidential elections that are scheduled for April 2019 seem to have a big impact on direct investment realization in Indonesia this year. Based on the latest data from the Investment Coordinating Board (BKPM), foreign direct investment (FDI) realization dropped 20.2 percent year-on-year (y/y) to IDR 89.1 trillion (USD $5.9 billion) in the third quarter of 2018. This constitutes the third consecutive quarterly decline in FDI realization in Indonesia.
But remarkably, domestic direct investment (DDI) realization surged 30.5 percent (y/y) to IDR 84.7 trillion (approx. USD $5.6 billion) in the third quarter of 2018. Therefore, we detect a major difference between foreign and domestic direct investment realization so far in 2018: while FDI has been declining markedly since the first quarter of 2018, DDI has in fact continued its growing trend (see table below).
Foreign and Domestic Direct Investment in Indonesia:
| Q1 2017 |
Q2 2017 |
Q3 2017 |
Q4 2017 |
Q1 2018 |
Q2 2018 |
Q3 2018 |
|
| Foreign Direct Investment (in IDR trillion) |
97.0↓ | 109.9↑ | 111.7↑ | 112.0↑ | 108.9↓ | 95.7↓ | 89.1↓ |
| Domestic Direct Investment (in IDR trillion) |
68.8↑ | 61.0↓ | 64.9↑ | 67.6↑ | 76.4↑ | 80.6↑ | 84.7↑ |
| Total Direct Investment (in IDR trillion) |
165.8↑ | 170.9↑ | 176.6↑ | 179.6↑ | 185.3↑ | 176.3↓ | 173.8↓ |
Source: BKPM
What is remarkable is that the value of DDI and FDI were not far apart in Q3-2018. This is in stark contrast to the usual situation (where the value of FDI - by far - outpaces the value of DDI) and if this recent trend continues, then the value of DDI will outpace the value of FDI in the last quarter of 2018. While it is positive that Indonesia becomes less dependent on FDI in terms of direct investment realization, it is obviously not a positive development to see FDI contracting for three consecutive quarters.
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Read the full article in the October 2018 edition of our monthly research report. You can purchase this report by sending an email to info@indonesia-investments.com or a WhatsApp (WA) message to the following number: +6287884106944
Poll Indonesia Investments:
Where do you think the rupiah will be at the end of 2018?
Voting possible: -
Results
- Above IDR 15,000 per US dollar (45.7%)
- IDR 14,500 - 15,000 per US dollar (26.3%)
- IDR 14,000 - 14,500 per US dollar (12.8%)
- IDR 13,500 - 14,000 per US dollar (5.8%)
- Below IDR 13,500 per US dollar (5%)
- No opinion (4.3%)
Total amount of votes: 600