Growth of Foreign Direct Investment (FDI) in Indonesia Slows in Q2-2016
Direct investment in Indonesia (both domestic and foreign) totaled IDR 298.1 trillion in the first half of 2016, up 14.8 percent from investment realization in the same period one year earlier. Foreign direct investment (FDI) was recorded at IDR 195.5 trillion¹, up 12.3 percent (y/y) - and accounting for 65.6 percent of total investment realization in the first six months of 2016 - while domestic direct investment (DDI) rose 20.0 percent (y/y) over the same period. On a quarter-to-quarter basis, FDI into Indonesia rose 7.9 percent, considerably lower than the 17.1 percent (q/q) growth pace in the preceding quarter.
The most popular destinations of foreign direct investment in Indonesia in 1H-2016 were the paper and printing industry (USD $2.4 billion), the metal, machinery and electronic industry (USD $1.6 billion), and the chemical and pharmaceutical industry (USD $1.5 billion). The second-biggest investor in Indonesia in 1H-2016 was Japan with USD $2.90 billion.
Singapore remained the biggest source of foreign investment. During the January-June 2016 period, Singaporean companies invested some USD $4.89 billion in Southeast Asia's largest economy (in a total of 2,675 projects). This is considerably higher than the USD $3.2 billion that was invested by Singapore in Indonesia in the same period one year earlier.
Although investment realization in Indonesia is still highly focused on the island of Java, investment in the "Outer Islands" rose at a higher pace in the January-June 2016 period. Investment on Java climbed 12.4 percent (y/y) to IDR 162.6 trillion, while the combined investment in all other parts of Indonesia stood at 135.5 trillion, up 17.7 percent (y/y). Rapidly rising investment realization outside Java is highly welcomed as it will reduce existing inequality between the economic development of Java and the rest of the country.
Thomas Trikasih Lembong, the newly appointed Chairman of the Indonesia Investment Coordinating Board (BKPM) - replacing Franky Sibarani -, remains optimistic that the total investment realization target for full-year 2016 - set at IDR 594.8 trillion - can be achieved.
¹ BKPM uses a IDR 13,900 per US dollar exchange rate (in line with the rate set in the 2016 State Budget)
Foreign and Domestic Investment in Indonesia (in IDR trillion):
| 2014 |
2015 | 2016 | ||||||||
| Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | |
| Domestic Direct Investment |
34.6 | 38.2 | 41.6 | 41.7 | 42.5 | 42.9 | 47.8 | 46.2 | 50.4 | 52.2 |
| Foreign Direct Investment |
72.0 | 78.0 | 78.3 | 78.7 | 82.1 | 92.2 | 92.5 | 99.2 | 96.1 | 99.4 |
| Total Investment |
106.6 |
116.2 | 119.9 | 120.4 | 124.6 | 135.1 | 140.3 | 145.4 | 146.5 | 151.6 |
| 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)