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Foreign direct investment (FDI) in the healthcare industry of Indonesia rose steeply in the first half of 2017 after the government opened up the general hospital sector to foreign investment by revising the Negative Investment List (in Indonesian: Daftar Negatif Investasi) in 2016.
After macroeconomic growth was rather disappointing at 5.01 percent year-on-year (y/y) in the second quarter of 2017, the Indonesian government will soon release a new economic policy package, specifically aimed at boosting investment in Indonesia. However, Indonesia's business world urge the government to first evaluate the effectiveness of preceding policy packages before implementing a new deregulation package. Moreover, some say it would be better to focus on improving confidence among consumers.
Giant venture capital firm Wavemaker Partners is setting up a new fund with Indonesia being a key market. The new USD $50 million fund will focus on 80 early-stage technology startups in Southeast Asia (particularly business-to-business ventures). Wavemaker Partners is part of the Draper Venture Network, a leading global venture capital collective with ten funds spread across four continents.
Thomas Lembong, Head of the Indonesia Investment Coordinating Board (BKPM), said he wants Indonesia to tap the momentum of the recent "One Belt, One Road" summit in Beijing (China), organized earlier this month, by promoting three Indonesian provinces to foreign investors as a great investment destination. These three provinces are North Sumatra, North Kalimantan, and North Sulawesi.
After Standard & Poor's (S&P) assigned investment grade status to Indonesia's sovereign rating, hence boosting positive perceptions about the Indonesian economy, the government should use this momentum to encourage public and private investment to push macroeconomic growth to the targeted range of 5.4 - 6.1 percent year-on-year (y/y) in 2018.
Investment in Indonesia's oil and gas sector remained bleak in the first quarter of 2017. The key reason why oil and gas companies are still reluctant to invest in any exploration and expansion projects is the low crude oil price that remains below the USD $50 per barrel level. In Q1-2017 investment in Indonesia's oil and gas sector fell 4.1 percent year-on-year (y/y) to USD $2.57 billion. Indonesia's upstream oil and gas regulator SKK Migas targets to attract a total of USD $12.87 billion worth of investment in the oil and gas sector in 2017.
Indonesia's Financial Services Authority (OJK) warns domestic and foreign investors about the presence of unclear, sometimes even illegal, online platforms or companies that offer lucrative investment opportunities. In the first two months of 2017 the OJK already forced the closure of 19 illegal platforms and companies as they were considered harmful for the consumer or investor. Several of these 19 obscure entities do not even have a clear address.
Investment in Indonesia is expected to rise in 2017. This covers both direct investment and portfolio investment. Domestic direct investment (DDI) should grow on the back of Indonesia's low interest rate environment (making it cheaper for domestic investors to purchase credit) as well as higher capital injections (from the state budget) into Indonesia's state-owned enterprises. Meanwhile, foreign direct investment (FDI) is expected to rise on the back of Indonesia's accelerating economic growth and government reforms. Both FDI and DDI should also rise amid rising commodity prices.
Indonesia's Investment Coordinating Board (BKPM) has released the direct investment figures - both foreign direct investment (FDI) and domestic direct investment (DDI) - for the fourth quarter of 2016 (implying we now also know the full-year 2016 figures). The BKPM data show a number of interesting developments that we outline below.
Investment realization in Indonesia's capital city of Jakarta fell to IDR 51.2 trillion (approx. USD $3.8 billion) in full-year 2016, down from IDR 55 trillion worth of investment in the preceding year. Foreign direct investment (FDI) in Jakarta was recorded at IDR 41.5 trillion in 2016, while domestic direct investment (DDI) reached IDR 9.7 trillion. What explains this overall decline of investment in Jakarta?
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Indonesia continued to climb sharply in the World Bank's Doing Business Index. In the 2018 edition, which was released at the end of October 2017, Indonesia ranks 72nd, jumping 19 positions from being 91st in last year's ranking. The World Bank praised Indonesia and labelled it as the country that made the biggest improvements in business regulations among Asia Pacific nations since 2005.
In order to boost overall economic expansion as well as growth of several local industries, it is important for the city of Yogyakarta - located in the center of Java island - to see more infrastructure development. The local government has the crucial task to either invest directly in infrastructure development or to encourage private investment in infrastructure development by safeguarding a conducive regulatory environment and attractive investment environment.
Those who have business interests in Panama and seek their dream house in the beautiful hills of this Central American country, or those who search an interesting investment object in Panama's property sector, now have a great opportunity at their disposal. One of the most beautiful luxury villas in Panama is now for sale. Insiders in Panama's property market call this "a unique object".
It is worrying that of total foreign investment commitments in Indonesia, only about 50 percent becomes actual investment. The other half decides - after initially being interested - not to pursue investment in Indonesia. Although not in all cases, it is believed that Indonesia's difficult investment climate scares away part of the (potential) investment community, specifically bureaucracy (red tape) and the lack of sufficient hard and soft infrastructure.
Thomas Lembong, Head of Indonesia's Investment Coordinating Board (BKPM), said the 5.01 percent year-on-year (y/y) economic growth pace of Indonesia in the second quarter of 2017 was rather disappointing as consumption remained bleak. Only Indonesia's export and investment realization showed an improvement, Lembong added. But, overall, Indonesia's economic growth stagnated.
With the Indonesian economy estimated to expand at a stable pace of 5.0-6.0 percent year-on-year (y/y) in the years ahead, the country's supply of energy needs to be raised. If not, businesses will increasingly be plagued by blackouts, while the price of energy rises (causing growing production costs). The upstream oil and gas industry - that involves exploration, development and production - therefore has a vital role to play in Indonesia's energy supply and economy.
The Investment Coordinating Board of Indonesia (in Indonesian: Badan Koordinasi Penanaman Modal, or BKPM) reported that total direct investment realization in Indonesia was recorded at IDR 170.9 trillion in the second quarter of 2017. This constitutes a 12.7 percent growth pace from IDR 151.6 trillion worth of total direct investment in the same quarter one year earlier. Thomas Lembong, Head of BKPM, said investment realization managed to absorb 345,323 Indonesian workers in Q2-2017.
Unilever Indonesia, one of the largest consumer goods producers in Indonesia, will continue to focus on the strengthening of its production lines. The company plans to invest up to USD $500 million over the next five years. Sancoyo Antarikso, External Relations Director & Corporate Secretary at Unilever Indonesia, said the funds will be used to expand production capacity of the company's nine factories across Indonesia.
Around the globe there are plenty of fraudulent investment scams offered to investors (for example the "ponzi scheme", "pump and dump", and many others). This also occurs in Indonesia, or, related to Indonesia. Perpetrators can be Indonesian or foreign. In case of foreigners, the offshore investing scheme is a popular scheme (and a fairly simple one in the era of Internet). Criminals offer victims a lucrative investment opportunity in Indonesia, promising big profits. However, investors will never see their money again.
Donald Trump becoming next US president in January 2017 will not affect foreign direct investment (FDI) in Indonesia according to the Indonesia Investment Coordinating Board (BKPM). Trump's election caused a huge wave of uncertainty in financial markets worldwide. However, the BKPM remains committed to its investment realization targets (including both domestic and foreign direct investment) of IDR 594.8 trillion (approx. USD $44.7 billion) in 2016 and IDR 631.5 trillion (approx. USD $47.5 billion) in 2017.
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