Foreign Direct Investment in Indonesia Picks Up in Q1

Foreign direct investment in Indonesia grew at a slightly faster pace in the first quarter of 2018, but the investment board warned of possible slowdown as the government scales back its electricity program. (JG Photo/Yudha Baskoro)

By :  Nilufar Rizki and Tabita Diela | on 8:34 PM April 30, 2018
Category : Business, Economy

Jakarta. Foreign direct investment in Indonesia grew at a slightly faster pace in the first quarter of 2018, but the investment board warned of possible slowdown as the government scales back its electricity program.

The government needs FDI not only to help create jobs and grow Southeast Asia's largest economy, but also to fund a widening current account deficit.

President Joko "Jokowi" Widodo has rolled out a series of regulatory changes intended to attract investment and last year he promised to cut permit issuance to within one day.

Indonesia attracted Rp 108.9 trillion ($7.84 billion) in FDI in January-March, excluding banking and the oil and gas sector, the Investment Coordinating Board (BKPM) said on Monday (30/04).

The dollar equivalent was based on an exchange rate of 13,400 for the rupiah, as assumed in the 2018 state budget. The current spot rate is much weaker at 13,885 to the dollar.

In rupiah terms, first-quarter FDI grew 12.4 percent from a year ago, faster than the 10.6 percent growth in the fourth quarter of 2017. The investment board had estimated the total fourth-quarter inflow at $8.36 billion.

BKPM chairman Thomas Lembong said the board was still reviewing the 2018 FDI target of Rp 477.4 trillion to reflect the revision in the government's power program.

The government has said it plans to delay some power projects as it struggles to realize an ambitious goal to generate an additional 35 gigawatts of electricity between 2014 and 2019.

The utility sector was the third-biggest beneficiary of FDI in the first quarter. The first and second were the property and base-metal sectors.

Singapore was the biggest source of investment, followed by Japan and South Korea.

Thomas said other plans by Jakarta to improve investment climate, including by easing rules on foreign ownership in some sectors, should make Indonesia more attractive for investors.

"The biggest factor that determines an investment is the momentum of licensing reform and economic reform," Thomas said.

Earlier on Monday, Jokowi called for his administration to accelerate reforms and to be more open to FDI, especially export-oriented investment.

The president said Indonesia has lost out to neighboring countries such as Malaysia, Thailand and Vietnam on getting FDI.

"They're running very fast. We have to be careful or else we could be losing out to Laos and Cambodia too if we are stuck in a routine," Jokowi told his economic ministers, mayors and governors.

Reuters

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