JAKARTA, KOMPAS \u2014 Foreign direct investment (FDI) growth in Indonesia\nslowed in the second quarter of 2025. The decline was triggered by\nintensifying global competition to attract investment and a trend among\nmajor economies, such as the United States, to reshore their investment\nflows.<\/p>\n
\u201cCompetition to attract investment is now increasingly fierce. At the\nsame time, many countries, such as the US, are beginning to pull their\ninvestments back home. This is something we must navigate properly,\u201d\nsaid Minister of Investment and Downstreaming Rosan Perkasa Roeslani at\na press conference in Jakarta on Tuesday (29\/7\/2025).<\/p>\n
The Ministry of Investment\/Investment Coordinating Board (BKPM)\nrecorded FDI realisation in Q2 2025 at Rp 202.2 trillion, down 6.9 per\ncent compared with the same period in 2024, which stood at Rp 217.3\ntrillion.<\/p>\n
Nevertheless, overall investment realisation throughout the first\nhalf of 2025 continued to grow, reaching Rp 942.9 trillion \u2014 up 13.6 per\ncent compared with the same period in 2024. This achievement is\nequivalent to 49.5 per cent of the 2025 national investment target of Rp\n1,905.6 trillion.<\/p>\n
By country of origin, Singapore remained the largest foreign investor\nin Indonesia with investment valued at US$8.8 billion, followed by Hong\nKong (US$4.6 billion), China (US$3.6 billion), Malaysia (US$1.7\nbillion), and Japan (US$1.6 billion).<\/p>\n
Rosan noted that Indonesia possesses enormous potential across\nvarious strategic sectors, from minerals, plantations and agriculture to\nmaritime resources. To optimally harness this investment potential, the\ngovernment faces the key challenge of establishing legal certainty and\nproducing regulations that support the investment climate.<\/p>\n
To address these challenges, the government has revised Government\nRegulation Number 5 of 2021 to simplify business licensing. The revision\nprocess was conducted intensively and involved 18 ministries before\nfinal approval.<\/p>\n
Beyond regulatory reform, the government is also strengthening\ncommunication on investment policies to global investors. \u201cSometimes our\npolicies are good, but if they are not socialised, investors don\u2019t know\nabout them. Therefore, we must proactively convey them directly,\nespecially to foreign investors,\u201d Rosan said.<\/p>\n
Workforce Readiness<\/strong><\/p>\n Rosan added that local workforce readiness, or the pool of talent, is\none of the important factors that prospective investors consider. The\ngovernment continues to prepare human resources aligned with industry\nneeds and technological developments.<\/p>\n Investor confidence is also being built through direct government\nengagement, including President Prabowo Subianto\u2019s visits to various\ncountries. Meetings with business leaders are always a primary agenda\nitem during these state visits.<\/p>\n The government is also relying on the role of Danantara, the\nstate-owned sovereign wealth fund (SWF), which not only accompanies but\nalso participates in co-financing projects with foreign investors. \u201cIf\nthe government itself contributes funds, they will be more confident\nthat the process will run better and faster,\u201d he said.<\/p>\n Rosan claimed that investment during the first half of 2025 absorbed\n1.25 million workers. Distribution was fairly even, with 50.5 per cent\nof investment occurring outside Java at Rp 476 trillion, whilst the\nremaining 49.5 per cent was spread across Java at Rp 466.9 trillion.<\/p>\n The five subsectors with the largest investment realisation through\nJune 2025 were basic metals and metal products (Rp 134.4 trillion),\ntransport, warehousing and telecommunications (Rp 110.7 trillion),\nmining (Rp 102.2 trillion), other services (Rp 85.7 trillion), and\nhousing, industrial estates and office buildings (Rp 75 trillion).<\/p>\n Senior economist at Paramadina University, Wijayanto Samirin,\nassessed that to meet the 2025 national investment target of Rp 1,905.6\ntrillion, the government needs to anticipate several obstacles, ranging\nfrom the slowdown in foreign investment flows to structural challenges\nwithin the investment ecosystem.<\/p>\n According to him, the government\u2019s optimism regarding achieving the\ninvestment target is reasonably grounded, given the various policy\nreforms, active outreach to global investors, and support from state\ninvestment entities such as Danantara. \u201cHowever, global dynamics and the\nFDI slowdown indicate that the projection still requires extra effort to\nbe realised in a short timeframe,\u201d he said.<\/p>\n Wijayanto observed that investment in 2025 nonetheless continues to\nmake a positive contribution, particularly in job creation. He\nidentified the housing, manufacturing, trade and services sectors as the\nmain contributors to labour absorption. \u201cLooking at investment trends\nand economic growth through June 2025, I estimate that approximately 3.5\nmillion to 4 million jobs will be created throughout this year,\u201d he\nsaid.<\/p>\n Previously, a report issued by the Organisation for Economic\nCo-operation and Development (OECD) entitled \u201cOECD Economic Outlook\u201d\n(June 2025 edition) stated that accelerating public investment\nrealisation through Danantara, accompanied by guarantees of transparency\nand accountability in its management, could provide a significant boost\nto national economic growth. \u201cIn the short term, this is viewed as an\nappropriate step to address fiscal pressures and slowing domestic\ndemand,\u201d the OECD said in its report.<\/p>\n The OECD projected that the state budget (APBN) deficit would\nincrease from 2.3 per cent of gross domestic product (GDP) in 2024 to\n2.8 per cent in 2025. This increase was driven by the expansion of the\nfree meals programme for schoolchildren and pregnant women, the\nestablishment of the state wealth fund through BPI Danantara, and\nsubsidy policies including electricity tariff discounts at the start of\n2025. The OECD estimated that these policies would exert additional\npressure of 1.6 per cent on the budget deficit.<\/p>",
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