Foreign Direct Investment Growth Slows in Q2 2025 Amid Intensifying Global Competition
JAKARTA, KOMPAS — Foreign direct investment (FDI) growth in Indonesia slowed in the second quarter of 2025. The decline was triggered by intensifying global competition to attract investment and a trend among major economies, such as the United States, to reshore their investment flows.
"Competition to attract investment is now increasingly fierce. At the same time, many countries, such as the US, are beginning to pull their investments back home. This is something we must navigate properly," said Minister of Investment and Downstreaming Rosan Perkasa Roeslani at a press conference in Jakarta on Tuesday (29/7/2025).
The Ministry of Investment/Investment Coordinating Board (BKPM) recorded FDI realisation in Q2 2025 at Rp 202.2 trillion, down 6.9 per cent compared with the same period in 2024, which stood at Rp 217.3 trillion.
Nevertheless, overall investment realisation throughout the first half of 2025 continued to grow, reaching Rp 942.9 trillion — up 13.6 per cent compared with the same period in 2024. This achievement is equivalent to 49.5 per cent of the 2025 national investment target of Rp 1,905.6 trillion.
By country of origin, Singapore remained the largest foreign investor in Indonesia with investment valued at US$8.8 billion, followed by Hong Kong (US$4.6 billion), China (US$3.6 billion), Malaysia (US$1.7 billion), and Japan (US$1.6 billion).
Rosan noted that Indonesia possesses enormous potential across various strategic sectors, from minerals, plantations and agriculture to maritime resources. To optimally harness this investment potential, the government faces the key challenge of establishing legal certainty and producing regulations that support the investment climate.
To address these challenges, the government has revised Government Regulation Number 5 of 2021 to simplify business licensing. The revision process was conducted intensively and involved 18 ministries before final approval.
Beyond regulatory reform, the government is also strengthening communication on investment policies to global investors. "Sometimes our policies are good, but if they are not socialised, investors don't know about them. Therefore, we must proactively convey them directly, especially to foreign investors," Rosan said.
**Workforce Readiness**
Rosan added that local workforce readiness, or the pool of talent, is one of the important factors that prospective investors consider. The government continues to prepare human resources aligned with industry needs and technological developments.
Investor confidence is also being built through direct government engagement, including President Prabowo Subianto's visits to various countries. Meetings with business leaders are always a primary agenda item during these state visits.
The government is also relying on the role of Danantara, the state-owned sovereign wealth fund (SWF), which not only accompanies but also participates in co-financing projects with foreign investors. "If the government itself contributes funds, they will be more confident that the process will run better and faster," he said.
Rosan claimed that investment during the first half of 2025 absorbed 1.25 million workers. Distribution was fairly even, with 50.5 per cent of investment occurring outside Java at Rp 476 trillion, whilst the remaining 49.5 per cent was spread across Java at Rp 466.9 trillion.
The five subsectors with the largest investment realisation through June 2025 were basic metals and metal products (Rp 134.4 trillion), transport, warehousing and telecommunications (Rp 110.7 trillion), mining (Rp 102.2 trillion), other services (Rp 85.7 trillion), and housing, industrial estates and office buildings (Rp 75 trillion).
Senior economist at Paramadina University, Wijayanto Samirin, assessed that to meet the 2025 national investment target of Rp 1,905.6 trillion, the government needs to anticipate several obstacles, ranging from the slowdown in foreign investment flows to structural challenges within the investment ecosystem.
According to him, the government's optimism regarding achieving the investment target is reasonably grounded, given the various policy reforms, active outreach to global investors, and support from state investment entities such as Danantara. "However, global dynamics and the FDI slowdown indicate that the projection still requires extra effort to be realised in a short timeframe," he said.
Wijayanto observed that investment in 2025 nonetheless continues to make a positive contribution, particularly in job creation. He identified the housing, manufacturing, trade and services sectors as the main contributors to labour absorption. "Looking at investment trends and economic growth through June 2025, I estimate that approximately 3.5 million to 4 million jobs will be created throughout this year," he said.
Previously, a report issued by the Organisation for Economic Co-operation and Development (OECD) entitled "OECD Economic Outlook" (June 2025 edition) stated that accelerating public investment realisation through Danantara, accompanied by guarantees of transparency and accountability in its management, could provide a significant boost to national economic growth. "In the short term, this is viewed as an appropriate step to address fiscal pressures and slowing domestic demand," the OECD said in its report.
The OECD projected that the state budget (APBN) deficit would increase from 2.3 per cent of gross domestic product (GDP) in 2024 to 2.8 per cent in 2025. This increase was driven by the expansion of the free meals programme for schoolchildren and pregnant women, the establishment of the state wealth fund through BPI Danantara, and subsidy policies including electricity tariff discounts at the start of 2025. The OECD estimated that these policies would exert additional pressure of 1.6 per cent on the budget deficit.
"Competition to attract investment is now increasingly fierce. At the same time, many countries, such as the US, are beginning to pull their investments back home. This is something we must navigate properly," said Minister of Investment and Downstreaming Rosan Perkasa Roeslani at a press conference in Jakarta on Tuesday (29/7/2025).
The Ministry of Investment/Investment Coordinating Board (BKPM) recorded FDI realisation in Q2 2025 at Rp 202.2 trillion, down 6.9 per cent compared with the same period in 2024, which stood at Rp 217.3 trillion.
Nevertheless, overall investment realisation throughout the first half of 2025 continued to grow, reaching Rp 942.9 trillion — up 13.6 per cent compared with the same period in 2024. This achievement is equivalent to 49.5 per cent of the 2025 national investment target of Rp 1,905.6 trillion.
By country of origin, Singapore remained the largest foreign investor in Indonesia with investment valued at US$8.8 billion, followed by Hong Kong (US$4.6 billion), China (US$3.6 billion), Malaysia (US$1.7 billion), and Japan (US$1.6 billion).
Rosan noted that Indonesia possesses enormous potential across various strategic sectors, from minerals, plantations and agriculture to maritime resources. To optimally harness this investment potential, the government faces the key challenge of establishing legal certainty and producing regulations that support the investment climate.
To address these challenges, the government has revised Government Regulation Number 5 of 2021 to simplify business licensing. The revision process was conducted intensively and involved 18 ministries before final approval.
Beyond regulatory reform, the government is also strengthening communication on investment policies to global investors. "Sometimes our policies are good, but if they are not socialised, investors don't know about them. Therefore, we must proactively convey them directly, especially to foreign investors," Rosan said.
**Workforce Readiness**
Rosan added that local workforce readiness, or the pool of talent, is one of the important factors that prospective investors consider. The government continues to prepare human resources aligned with industry needs and technological developments.
Investor confidence is also being built through direct government engagement, including President Prabowo Subianto's visits to various countries. Meetings with business leaders are always a primary agenda item during these state visits.
The government is also relying on the role of Danantara, the state-owned sovereign wealth fund (SWF), which not only accompanies but also participates in co-financing projects with foreign investors. "If the government itself contributes funds, they will be more confident that the process will run better and faster," he said.
Rosan claimed that investment during the first half of 2025 absorbed 1.25 million workers. Distribution was fairly even, with 50.5 per cent of investment occurring outside Java at Rp 476 trillion, whilst the remaining 49.5 per cent was spread across Java at Rp 466.9 trillion.
The five subsectors with the largest investment realisation through June 2025 were basic metals and metal products (Rp 134.4 trillion), transport, warehousing and telecommunications (Rp 110.7 trillion), mining (Rp 102.2 trillion), other services (Rp 85.7 trillion), and housing, industrial estates and office buildings (Rp 75 trillion).
Senior economist at Paramadina University, Wijayanto Samirin, assessed that to meet the 2025 national investment target of Rp 1,905.6 trillion, the government needs to anticipate several obstacles, ranging from the slowdown in foreign investment flows to structural challenges within the investment ecosystem.
According to him, the government's optimism regarding achieving the investment target is reasonably grounded, given the various policy reforms, active outreach to global investors, and support from state investment entities such as Danantara. "However, global dynamics and the FDI slowdown indicate that the projection still requires extra effort to be realised in a short timeframe," he said.
Wijayanto observed that investment in 2025 nonetheless continues to make a positive contribution, particularly in job creation. He identified the housing, manufacturing, trade and services sectors as the main contributors to labour absorption. "Looking at investment trends and economic growth through June 2025, I estimate that approximately 3.5 million to 4 million jobs will be created throughout this year," he said.
Previously, a report issued by the Organisation for Economic Co-operation and Development (OECD) entitled "OECD Economic Outlook" (June 2025 edition) stated that accelerating public investment realisation through Danantara, accompanied by guarantees of transparency and accountability in its management, could provide a significant boost to national economic growth. "In the short term, this is viewed as an appropriate step to address fiscal pressures and slowing domestic demand," the OECD said in its report.
The OECD projected that the state budget (APBN) deficit would increase from 2.3 per cent of gross domestic product (GDP) in 2024 to 2.8 per cent in 2025. This increase was driven by the expansion of the free meals programme for schoolchildren and pregnant women, the establishment of the state wealth fund through BPI Danantara, and subsidy policies including electricity tariff discounts at the start of 2025. The OECD estimated that these policies would exert additional pressure of 1.6 per cent on the budget deficit.