FILE PHOTO: A worker stands on a container at Tanjung Priok Port in Jakarta, Indonesia, January 11, 2021. Picture taken January 11, 2021. REUTERS/Willy Kurniawan/File Photo
JAKARTA: The overall investment target for last year has been met despite stagnant foreign direct investment (FDI), thanks to domestic investors picking up the slack, the Investment and Downstream Minister says.
“Last year was indeed not an easy one because, as we all know, the global economy was still clouded by uncertainty, starting from a global economic slowdown and geopolitical tension to the fragmentation of international trade,” Investment Minister Rosan Roeslani told a press conference on Jan 15, noting that realised FDI increased just 0.1% last year.
Though foreign investment had accounted for slightly more than half of realised investment in recent years, domestic investment outstripped FDI by around 130 trillion rupiah or about US$7.7bil last year at 1.03 quadrillion rupiah and 900 trillion rupiah in realised investments.
Of the realised FDI, mainland China and Hong Kong together accounted for US$18.1bil , followed closely by Singapore with US$17.4bil, and then Malaysia with US$4.5bil and Japan with US$3.1bil.
Over a quarter of the realised FDI went into the metals industry, while less than 10% went toward mining. Similarly, domestic investors favoured the transportation, warehousing and telecommunications sectors over mining.
Total realised investment reached 1.93 quadrillion rupiah, an increase of 12.7% year-on-year (y-o-y).
Though this figure slightly exceeded the government target for last year, it paled in comparison to the 20.8% recorded in 2024.
Rosan said he was not concerned about the decline in growth rate over the past two years, given that the overall target for the five years between last year and 2029 was far higher at 13 quadrillion rupiah than the 9.1 quadrillion rupiah in realised investment from 2014 to 2024.
“The increase in terms of percentage may be smaller but in terms of amount, the total has increased by a lot,” he said.
Rather than elaborating on weak FDI growth, Rosan commended domestic investment growth of 26.6% y-o-y in his presentation last Thursday, expressing confidence about further growth this year.
“We believe that domestic investment will grow far larger thanks to Danantara,” said the minister.
“I can guarantee that domestic investment this year will rise higher,” he added, implying that the state asset fund would channel greater funding to projects this year.
Rosan explained that Danantara, which he also heads as chief executive, had been busy with regulatory and organisational aspects for most of last year since it was established in February, and had only commenced investment activities in October.
Danantara could make investments “in tandem” with foreign investors and thereby also stimulating FDI at the same time, he said, with a particular eye on sectors such as healthcare, chemicals and downstream processing.
Rosan said foreign investors were aware that investment meant “taking a risk, a calculated risk”, but disliked uncertainty, and emphasised that the government had undertaken efforts to reduce uncertainty while being upfront about the risks of investing in the country. “One thing is for sure, global uncertainty will remain,” he said.
“Indonesia will make sure that we always offer clarity and consistency. Indonesia doesn’t promise a risk-free world, but no one can. What we offer is a clear direction in stability, in scale and also in standards,” he said.
Syafruddin Karimi, an economics professor at Andalas University, told The Jakarta Post last Thursday that stagnant FDI meant “Indonesia is not yet winning in the competition of attracting long-term global capital” due to the dual “disease” of external conditions and domestic problems.
External factors from tight global liquidity and geopolitical volatility to high yields from safe assets had prompted investors to delay big decisions, he explained, particularly in projects requiring long-term cash-flow certainty.
Meanwhile, the country was contending with the age-old problem of regulatory certainty and poor execution.
Syafruddin also cautioned that many investors would reroute funds to countries that could provide greater certainty than Indonesia, which had a reputation for sudden changes in regulatory direction. “External factors exacerbate the situation, but regulatory aspects and weak execution prolong the disease.
Indonesia has to recover its credibility through stable regulations, firm contract execution and policy packages that are consistent from planning to realisation,” he stressed.
In an analysis released last Thursday, Bank Danamon economist Hosianna Evalita Situmorang noted that the investment momentum was “expected to remain firm” this year. — The Jakarta Post/ANN
