EU: Indonesia's main investor and trading partner

EU: Indonesia's main investor and trading partner

EU: The largest investor in Indonesia

Mature economic links exist between Indonesia and the European
Union (EU). These deep roots to bilateral economic relations have
proven their value during the current economic crisis. In 1998,
Indonesia experienced a net outflow/withdrawal of Foreign Direct
Investment (FDI). Europe, however, was the only part of the world
from which the flow of FDI into Indonesia remained positive.

It is not surprising, therefore, that according to Indonesia's
Investment Coordinating Board, the EU is the largest investor
since the board started collecting data in 1967, with a total
value of approved investment projects up to end-November 1999 of
US$42.9 billion, not including oil and gas and banking sectors
(Japan $35.2 billion, the U.S. $10.4 billion). According to Bank
Indonesia data, Europe has been responsible for almost half (46
percent) of total investments in Indonesia over the period 1995-
1998.

Traditionally, European investments have been directed mainly
to the sectors of food, food processing, chemicals, health care
and banking, usually with the primary purpose of servicing the
domestic market. In recent years, following liberalization, EU
investors have become interested in the service sectors,
concentrating on utilities (electricity, gas and water) and
logistics (transportation, storage and communications). Since the
mid-1990s, EU companies have also become a major presence in
consultancy and other service industries.

The hotel and restaurant sector has also received the keen
attention of small and medium scale investors from Europe. This
is not surprising as more visitors come to Indonesia from the EU
each year than from the U.S. and Japan combined. Statistics show
that they also stay the longest and spend the most.

EU: Indonesian's second largest trading partner

In the period from 1985 to 1998, the EU's share in Indonesian
exports and imports has been steadily growing. As a result, the
EU has become the second most important destination of
Indonesia's exports (after Japan), and the largest source for
Indonesia's imports.

The deep economic and monetary crisis that struck Indonesia in
1997 has had major implications for bilateral trade. As a result,
the trade balance made a drastic swing in favor of Indonesia.

EU imports from Indonesia are higher now than they were before
the start of the economic crisis, and EU investment in Indonesia
has increased despite the turbulent situation confronting the
country.