Jakarta, CNBC Indonesia - Foreign direct investment (FDI) flows have\nbecome a crucial component of global economic growth as the footprint of\nmultinational companies expanded following the Second World War.\nHowever, global FDI flows have slowed significantly due to geopolitics,\nrising nationalism, and state capitalism altering investment\nstreams.<\/p>\n
After its golden era during the Tokyo Round period (1974-1979) \u2013\nwhere trade barriers such as import tariffs fell \u2013 global FDI entered a\nnew phase with a slowing trend.<\/p>\n
Between 1982 and 2006, the total stock of global direct investment\ngrew 20-fold. Global trade rose from 39% of world gross domestic product\n(GDP) in 1980 to 61% in 2008.<\/p>\n
This slowing trend has been shaped by numerous global economic\nshocks, such as the Covid-19 pandemic, protectionist policies, and\ngeopolitical tensions.<\/p>\n
Global Trend Slows, But Not in All Countries<\/p>\n
In recent years, global FDI has slowed as the world faces various\nshocks. However, this trend varies greatly by region.<\/p>\n
Several Asian economies, namely China, Indonesia, Malaysia,\nSingapore, and Taiwan, recorded extraordinary growth in FDI stock\nthroughout 2017 to 2023, along with significant expansion in their\noutward FDI stock.<\/p>\n
In contrast, growth in North and Central America (dominated by the\nUnited States) was just under 30%, while European FDI showed almost no\ngrowth in the same period.<\/p>\n
Although the aggregate global FDI trend is slowing, differences\nbetween countries persist. Some countries have even seen increases in\nFDI flows.<\/p>\n
Geopolitics as a Determinant of Global FDI Direction<\/p>\n
FDI investment decisions are now increasingly influenced by political\nfactors and the role of the state. In the geopolitical context, FDI is\nno longer solely driven by economic efficiency considerations but has\nalso become a strategic instrument to enhance a country\u2019s bargaining\npower.<\/p>\n
The tariff policies implemented by US President Donald Trump, which\nonce raised concerns among global business players, in practice became a\nstrategy to attract FDI to the United States.<\/p>\n
Through increased import tariffs, foreign companies were encouraged\nto relocate or expand their investments domestically in the US to\nmaintain access to its large domestic market. This phenomenon is known\nas tariff-jumping FDI.<\/p>\n
More broadly, geopolitical rivalry between the United States and\nChina has also shaped new patterns in global investment flows. A sort of\n\u201cunwritten rule\u201d has emerged, pushing multinational companies to choose\nto invest in one of the two countries rather than both\nsimultaneously.<\/p>\n
This fragmentation ultimately contributes to the decline in FDI flows\nbetween the United States and China, even though economically,\ninvestments in both countries remain profitable.<\/p>\n
When Nationalism Limits FDI Flows<\/p>\n
In addition to geopolitical factors, nationalism also plays a\nsignificant role in current FDI decisions.<\/p>\n
For cross-border merger and acquisition activities, countries tend to\nshow resistance to foreign ownership of domestic companies considered\nstrategic or of high historical value.<\/p>\n
The case of the planned acquisition of U.S. Steel by Nippon Steel is\na clear example. Although Nippon Steel offered additional investment,\ntechnology transfer, and job guarantees, opposition still arose from\nboth US presidential candidates at the time.<\/p>\n
This rejection was not solely based on economic considerations but\nalso on the symbolic value of U.S. Steel as a historic company founded\nby J.P. Morgan.<\/p>\n
However, in June 2025, Donald Trump approved the US$15 billion\nacquisition on the condition that the US government holds a golden\nshare, which provides significant control rights in company\ndecision-making.<\/p>\n
This change in stance shows that while nationalism is very appealing\nin the context of political campaigns, final decisions tend to be more\npragmatic. This is particularly influenced by geopolitical\nconsiderations and broader economic strategies.<\/p>\n
From Incentives to Pressure: The State\u2019s Role in FDI<\/p>\n
State capitalism is increasingly prominent in global investment\ndynamics, marked by the active role of governments in directing\nstrategic investment flows.<\/p>\n
In the United States, this approach began to appear through the CHIPS\nand Science Act policy in 2022 under the Joe Biden administration, which\nprovided large subsidies to global semiconductor companies to encourage\nthe development of the domestic chip industry.<\/p>\n
The state capitalism approach became more aggressive in the Donald\nTrump era, making it a primary instrument to attract foreign direct\ninvestment, especially from Asian countries.<\/p>\n
Rather than incentives, President Trump instead used tariff threats\nas trade pressure to increase investment commitments. With these\nthreats, foreign companies and countries were pushed to invest capital\nin the United States.<\/p>\n
Several companies and countries have committed to making major\ninvestments in the United States.<\/p>\n
In addition to those countries, Indonesia is also facing similar\npressure.<\/p>\n
The Indonesia-United States trade agreement, pressured in February by\nDonald Trump and Prabowo Subianto, requires Indonesia to meet investment\ncommitments as a condition to maintain tariff reductions to 19%.<\/p>\n
Specifically, Indonesia is asked to make greenfield investments in\nthe United States to create jobs, as stated in the bilateral trade\nagreement document in Article 6.1, Investment section, point 3.<\/p>\n
Greenfield investment itself is a form of FDI where a company builds\nnew business operations from scratch in the host country, including\nconstructing production facilities, offices, and supporting\ninfrastructure.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/global-investment-pace-completely-transformed-asia-charges-ahead-alone-1776243061", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }