FDI approvals drop in October: BKPM
Dadan Wijaksana, The Jakarta Post, Jakarta
Foreign direct investment (FDI) approvals have declined by 11 percent this year as of October, as compared with the same period in 2003, the latest data from the Coordinating Investment Board (BKPM) showed on Wednesday.
FDI approvals in the January-October period fell to US$8.85 billion from $9.94 billion in the same period of last year, the BKPM data indicated.
It did not outline reasons for the decline, having experienced a rise a month earlier. From January to September this year, FDI approvals reached $7.99 billion, or a 23 percent increase from the same period of last year.
October's drop dashed earlier hopes of an investment rebound as reflected by the September figure.
Over the past few years, overseas investors have steered clear of the country as a result of its adverse investment and business climate.
Once the country's main economic growth engine, net investment has been negative over the past year. And with exports yet to fully live up to expectations, domestic consumption has now become the main catalyst for growth.
Still being driven by robust consumption, Indonesia's economy is set to expand by 4.8 percent this year and 5.4 percent next year. But, various studies have shown that the nation would need a return in investment if it wants to generate higher and more sustainable economic growth.
With the workforce expanding by about 2.5 million people per year, the economy would need to grow by at least 6 percent to be able to accommodate them.
The World Bank said in its latest economic assessment report on Tuesday that the new government needs to act quickly to fix the domestic investment climate, which is deemed to remain uncompetitive in comparison with international conditions.
The Bank cited its recent survey, which found it takes 151 days on average for an investor to start a business in Indonesia -- five times longer than in Malaysia and Thailand.
Elsewhere, the BKPM said that as of October, the number of foreign-funded projects had reached 969 projects, up by some 10 percent from October the year before, when the figure stood at 876 projects.
Of the $8.85 billion new FDI approvals this year, it added, $5.15 billion came from approvals for 853 new projects.
The remaining approvals came from expanded projects (developed from existing projects) and projects that experienced a change in status (from a domestic investment to foreign investment scheme).
The areas of business that attracted the most interest were the trade sector with 357 projects; services with 164 projects; machinery and electronics, 70 projects; hotels and restaurants, 61 projects; and the warehouses and communications sector, 44 projects.
Based on location, Central Java topped the list of FDI destinations with projects there valued at $3.35 billion, followed by West Java ($1.57 billion), and Jakarta ($1.37 billion).
According to the BKPM, the combined projects would create 143,708 new jobs, including 4,114 for foreigners. Also, the total FDI approval had an export potential amounting to $7.07 billion, the BKPM said.
Top five FDI sources*
Country Value Number of Projects
Arab Saudi $3.01 b 4
Japan $1.46 b 55
Britain $1.04 b 67
Australia $0.48 b 31
Malaysia $0.44 b 86
* As of October
Source: BKPM