Thu, 21 Apr 2011

From: The Jakarta Globe
By Francezka Nangoy

Amid a bumper day of positive economic news for the country, the Investment Coordinating Board announced that foreign direct investment in Indonesia rose 11.6 percent in the first quarter from a year earlier.

News of the increase from the board, also known as the BKPM, complemented a standout day on the Jakarta Composite Index. The JCI rose 62.11 points, or 1.7 percent, to a record close of 3,794.76.

Sustained confidence in Indonesia’s economy showed as foreign direct investment rose to Rp 39.5 trillion ($4.6 billion) from Rp 35.4 trillion a year earlier, while domestic investment jumped to Rp 14.1 trillion from Rp 6.7 trillion a year earlier.

“Investors’ level of confidence can be seen here, especially after the central bank showed all the necessary statistics to support it and with rating agencies backing it up with improved ratings for Indonesia,” said Azhar Lubis, deputy chairman of investment controlling and implementation at BKPM.

Total realized investment grew 27.3 percent to Rp 53.6 trillion. Azhar said total investment is projected at Rp 240 trillion this year, with foreign investment accounting for Rp 170.4 trillion of that amount.

Private consumption accounts for about two-thirds of Indonesia’s economy, while investment makes up about 15 percent. The economy is projected to expand by 6.5 percent this year, up from 6.1 percent growth last year.

Azhar said the growth in investment was triggered by growing confidence in Indonesia’s business environment, as well as concrete steps from the government to improve the investment climate.

Destry Damayanti, an economist at Mandiri Sekuritas, said the news from BKPM showed Indonesia’s rising stature among foreign investors.

“This is clearly a positive sign. The talk about it being a good time to invest in Indonesia is finally starting to materialize,” Destri said on Wednesday. “The BKPM is targeting a 15 percent increase in foreign investment, so I think the first-quarter progress is on track and on schedule.

“The investment trend in the near future is also good. One of the drivers is the improvement in Indonesia’s rating, which indicates lower investment risk, better investment climate and good prospects for [economic] development.”

In January, Moody’s Investor Service upgraded Indonesia’s rating to one level below investment grade at Ba1. In February, Fitch Ratings upgraded Indonesia to BB+, while Standard & Poor’s did likewise in March.

Singapore is still Indonesia’s top foreign investor with $1.14 billion in 142 projects. Azhar pointed out that investors from Singapore are actually multinational companies that are not necessarily based in Singapore, but the subsidiaries in Singapore are the ones investing in Indonesia.

The United States was second after Singapore with 24 projects worth $359.1 million, while Japan followed in third place with $345.2 million.

The mining sector was the favorite among foreign investors, receiving $1.02 billion in 79 projects. Infrastructure projects, such as power plants, received $606.7 million, while transportation and communications received $593.1 million.

“We want more investment, but we also know which sectors need more attention than others,” Azhar said.

He also said the fate of a discussed tax holiday would be determined “around August.” The tax holiday would be directed toward investments considered a pioneer in their field or those in infrastructure.