Indonesia economy continues to offer vast potential thanks to country’s sustainable economic growth, political stability, large young population and growing middle class, as well as abundant natural resources. Investment has large multiplier effect in boosting economic growth, creating job opportunities, and shifting the current consumption-based economy to an economy driven by production.
Investment is a key driver of international economic integration and one of few factors of country’s economic growth including Indonesia. With the right policy framework, investment can provide financial stability, promote economic development and enhance the well-being societies. Source of investment in Indonesia is from Domestic Direct Investment (DDI) and Foreign Direct Investment (FDI).
As we know, we are currently facing an outbreak of COVID-19 pandemic in almost every country in the world including Indonesia. Indonesia’s total investment realization slightly increased in the first quarter of this year, but the global economic woes caused by the COVID-19 pandemic will likely reverse the investment trend in the rest of the year.
Indonesia Investment Coordinating Board (BKPM) announce the first quarter (January-March) of investment realization data in 2020 reached Rp 210.7 trillion or equivalent to 8.0% increase compared to the same period in 2019. Investment realization of first quarter contributed 23.8% to the 2020 target investment realization of Rp 886.1 trillion. DDI realization reached Rp 112.7 trillion dan FDI realization reached Rp 98.0 trillion.
There are several countries that have contributed to Indonesia’s FDI in first quarter of 2020, most of them are neighboring Asian countries. Here are the top five countries with the biggest foreign investment in Indonesia.
Amidst the COVID-19 outbreak, Singapore is still consistently ranked as the main country of FDI origin. In first quarter 2020 with US$ 6.5 2.7 billion, amounting to 23.1% 40% of the total FDI realization in Indonesia, Singapore is highly optimistic about the business prospects in Indonesia. However, Singapore went third place during the fourth quarter of 2019, investing US$ 1.1 billion in business ventures.
China has become a strong player in Indonesia’s FDI. Surpassing Singapore, China rose to the first place as the top country with the largest foreign investment in Indonesia during the fourth quarter of 2019 with US$ 1.4 billion. In first quarter 2020, China placed second with a total of US$ 1.3 billion of foreign investment. Most notably, China’s investment in Indonesia’s transportation, industry, and tourism.
Hong Kong, along with China, boosted the total of foreign investment in the last quarter of 2019 by US$ 1.1 billion, effectively placing Hong Kong into the list of leading countries of FDI in Indonesia. Moreover, Hong Kong has invested US$ 2.9 billion throughout 2019 US$ 0.6 billion throughout first quarter 2020, amounting to 10.2% 9.3% from the total of FDI realization.
Another top largest foreign investment comes from Japan. The strong ties between Indonesia and Japan have resulted in Japan consistently ranked in the top five foreign investors. In first quarter 2020, Japan has invested US$ 0.6 billion. Some of the sectors that Japan has invested in are electricity, real estate, gas, and industry.
In first quarter 2020, the foreign investment that Indonesia gained from the Malaysia reached US$ 0.5 billion. This put Malaysia among the other contenders of largest FDI in Indonesia, removing Netherlands from the list in which investment reached US$ 0.5 billion in the fourth quarter 2019
Sectors with the largest investment
Transportation, Warehouse, and Telecommunication sector dominated the investment realization as big as 23.4% of total realization throughout the first quarter of 2020. Top 5 leading sectors are listed below:
As for the distribution of foreign investment, the districts and areas outside Java keeps showing increasing trends. This includes Special Territory of Jakarta, West Java, North Maluku, Riau Islands, and South East Sulawesi.
The realization in first quarter of 2020 quite challenging due to COVID-19 outbreak, FDI in Indonesia decreased by 9.2% compared to the period of 2019. Government hope that foreign and domestic companies can survive in their operation with keep implementing the rules and regulations. BKPM as government institution remains committed to oversee investment projects from getting permit until solving problem in the field and together with other Ministries/Institutions keep continue facilitate obstacles faced by companies, especially in the midst of the COVID-19 pandemic. BKPM are optimistic this outbreak will end soon and the economy will rebound.