Tue, 28 Jul 2015

Realized investments showed a significant increase in the first half of this year as foreign direct investment (FDI) continued flowing into the country’s despite the global economic slowdown, according to the government’s latest investment figures.

Realized investment both from local and foreign investors rose by 16.6 percent to Rp 259.7 trillion (US$19.2 billion) year-on-year (yoy) in the first six months of this year amid no sign of an imminent recovery in the global economy, the Investment Coordinating Board (BKPM) reported on Monday.

“With this result, we are convinced that total realized investment could reach Rp 530 trillion by the end of the year or almost Rp 11 trillion above the initial target of Rp 519.5 trillion,” BKPM head Franky Sibarani said in a press conference.

Of the total realized investment in the first half, FDI accounted for Rp 174.2 trillion, or 67 percent of the total, while domestic direct investment (DDI) stood at Rp 85.5 trillion, according to the board’s data.

The data shows that FDI grew 16.1 percent yoy, while DDI rose 17.4 percent during the Jan-June period.

In the second quarter of this year alone, Indonesia saw Rp 135.1 trillion in realized investment, 16.3 percent higher on a yoy basis, and a 8.4 percent rise quarter-on-quarter (qoq).

In the second quarter, FDI rose 12.3 percent qoq to Rp 92.2 trillion while DDI grew only 0.9 percent to Rp 42.9 trillion, the data revealed.

Franky said the investment board was quite optimistic about exceeding this year’s target because the realization rate of new investments was usually higher in the second half.

The data shows that the shares of new FDI and DDI in the first half accounted for 82.5 percent and 62.3 percent, respectively, of the total realized investment during the period.

Franky added that the realized new FDI and DDI during the Jan-June period was also higher compared to the average realized new FDI and DDI between 2010 and 2015, which reached 61 percent and 58.4 percent, respectively.

“Slower economic growth is supposed to reduce investments, but the facts have shown a different story. These results make us optimistic that investments will continue to grow despite the downturn,” Franky said.

The data also shows that between January and June this year, Malaysia, Singapore and Japan stood out as the three biggest FDI contributors in Indonesia, with their combined realized investments in the country reaching $6.5 billion.

Azhar said Malaysia and Japan were Indonesia’s two biggest foreign investors that were starting to widen their scope of investment, pointing out that “Japan remains focused on the automotive and electronics-related sectors, but starting to enter the food industry, while Malaysia is eyeing infrastructure besides focusing on telecommunications and agro-based industry.”

Gadjah Mada University economist Tony Prasetiantono said the positive investment data had brought a “relief” amid the economic downturn, with the country’s Gross Domestic Product (GDP) still in with a chance of growing by more than 5 percent, perhaps by around 5.1-5.2 percent.

“Despite its lackluster economic growth, Indonesia remains attractive for FDI, because the sharp depreciation of the rupiah has helped to make investment in the country more affordable. President Joko Widodo’s aggressive boost in infrastructure will attract more foreign investors,” Tony told The Jakarta Post.

Bank Central Asia (BCA) economist David Sumual echoed Tony’s view that the improved investment data should be a positive signal for the government to start combating the country’s downward cycle by boosting its spending, especially on infrastructure.

“We saw high investment growth of 10.5 percent to the GDP in 2011, but then it slowed down to below 4 percent last year and is currently stagnant at 4.4 percent. We need to see at least 7 percent investment growth in the second half of this year if we want to achieve 5 percent GDP growth for the year,” David said.