Stable growth: Pedestrians in front of the Bank Indonesia headquarters in Jakarta. Indonesia contributes over 40% to the Asean economy, and the govt is confident that the country is more attractive than its peers in the region. — Bloomberg
JAKARTA: Indonesia booked strong growth in investment last year on the back of decent quarterly growth, thanks to well preserved political stability and economic fundamentals.
Investment and Downstream Minister Rosan Roeslani said in a press conference last Friday that total investment grew by 20.8% last year compared to the previous year.
“The realisation is a reflection of investor confidence. The investors maintain confidence under Prabowo Subianto’s presidency.
“The message that I received from the investors is that we have always been able to maintain peace and stability,” Rosan said at his Jakarta office.
In nominal terms, Indonesia raked in 1.7 quadrillion rupiah in investment last year, a respectable jump from 1.42 quadrillion rupiah in 2023.
Last year’s figure exceeded the 1.65 quadrillion rupiah target set by former president Joko “Jokowi” Widodo.
“So, this is a very, very good number and very, very delightful,” Rosan said after revealing that 2.45 million jobs were created from last year’s total investment.
Some 900 trillion rupiah or 52.5% of the total realisation was foreign direct investment (FDI), and the remaining 814 trillion rupiah or 47.5% of the total originated domestically.
Singapore contributed the most FDI to Indonesia at US$20.1bil last year, followed by China, including Hong Kong, at US$16.3bil, Malaysia at US$4.2bil and the United States at US$3.7bil.
Former investment minister Bahlil Lahadalia has often claimed that Singapore’s large contribution allegedly comes partly from Indonesians who keep their money in Singapore, as the city state is the region’s financial hub.
The largest pie of the FDI, or 22.6%, went to the metal industry and 8.6% ended up in mining.
The biggest chunk of the domestic investment, meanwhile, went to the transportation, warehousing and telecommunication subsector, which is responsible for 14.8% of the local share.
Rosan said that 23.8% of the total realisation was channeled to downstream development, of which nickel smelter investment accounted for the largest share.
The government plans to increase the 2025 investment target by 15.5% to 1.9 quadrillion rupiah, which Rosan said was needed so the country could reach gross domestic product growth of 5.3% this year.
Indonesia contributes over 40% to the Asean economy, and he is confident the country is more attractive than its peers in the region.
On a quarterly basis, investment grew by between 15 and 25% year-on-year (y-o-y) throughout last year. In the fourth quarter of financial year 2024 (4Q24) alone, the archipelago saw investment growth of 23.8% y-o-y.
Bank Permata chief economist Josua Pardede explained that the strong annual growth in 4Q24 was affected by a base effect as 2023’s 4Q23 realisation was ‘relatively low’ given political uncertainty that was prompted by the general election in February 2024.
“The end of the general election in February provided faster recovery in political certainty than the previous election.
This minimised the uncertainty period and enabled investors to make investment decisions faster,” Josua told The Jakarta Post last Friday.
Meanwhile, President Prabowo Subianto’s administration that came into office in late October provided political and policy certainties that encouraged investors.BCA chief economist David Sumual told the Post on Friday that while political certainty could not be taken for granted in investment, it was Indonesia’s economic fundamentals that had the final say.
David highlighted that the ministry’s investment realisation data was ‘puzzling’ and should be put under the microscope as it has been inconsistent with data from other sources. He pointed out that the ministry’s FDI data has been constantly climbing from less than 3% of gross domestic product (GDP) in 2021 to more than 4% of GDP in 2024.
In contrast, the change in FDI liabilities from Bank Indonesia’s (BI) balance of payment data has stagnated below 2% of GDP during the same time window.
FDI data from the United Nations Conference on Trade and Development has released similar readings to BI’s, according to data compiled by David’s office.
“My assumption is there are postponements of investment projects because the ministry’s realisation data does not come from project completion,” David said.
He explained that the ministry may have calculated the total investment into realisation as soon as the investor commences its investment project, irrespective of whether or not the entire investment amount has arrived onshore.
If that was the case, David stressed that the government must ensure that all investors followed through with the investment commitment, “that was the main message in need of underlining”. — The Jakarta Post/ANN
