FDI jumps by 23% into Indonesia
Southeast Asia's largest economy continues to be a magnet for foreign investors, who pumped in a record US$24.6 billion in investments last year, up 23 per cent from 2011.
Singapore maintained its position as the country's top investor, with US$4.9 billion. The total includes funds from multinationals as well as other firms with headquarters in Singapore.
It was followed by Japan and South Korea, with US$2.5 billion and US$1.9 billion, respectively.
"The not-too-favourable conditions in Europe and the United States have led investors to put funds in the emerging markets," Indonesia's investment coordinating board chief Chatib Basri said yesterday. "As the pace of growth in China and India slows, they are entering Indonesia where the trend of growth appears relatively stronger."
Investments in metal, machinery and electronics pipped mining as the top sector for foreign investors towards the end of the year, as the country seeks to attract more higher-value investments.
Mining, however, still contributed to a sixth of the foreign investments. A significant share of foreign investors also put their money into transport and logistics as Indonesia seeks to improve infrastructure throughout the country.
Foreign investment in the last three months of 2012 accounted for 68 per cent of the total investment in Indonesia over that period, with the balance coming from domestic sources. In the same period a year earlier, foreign investment accounted for 66 per cent of the total.
"This shows foreign investors have been more upbeat on Indonesia," said Dr Chatib. "Frankly, it has been easier for me to convince foreign investors - than to convince domestic investors - that Indonesia's economic growth outlook is strong."
He also said major floods in the greater Jakarta area last week would likely not affect industries and investments, because the areas most severely affected were generally residential rather than industrial estates. There may, however, be increased logistics costs as a result of the floods, as transport between factories and retail and distribution areas have been disrupted.
Electricity and water supplies in some areas were still patchy as the capital struggled to see a full recovery from its worst floods in six years.
Indonesian Employers Association (Apindo) chief Sofyan Wanandi told The Straits Times on Monday that the speed of recovery on the part of supporting businesses and infrastructure will be a key factor in winning investor confidence.
"But there must really be a coordinated effort to fix infrastructure, and assure businesses are under control," he added. "Otherwise they will move."