Rupiah Volatility Makes Foreign Investors Think Twice About Entering Indonesia

The recent volatile depreciation of the rupiah against the US dollar is not necessarily a boon for foreign investment in the industrial sector. Instead of snapping up land because it has become cheaper in foreign currency, overseas investors tend to adopt a wait-and-see stance. CEO of Leeds Property, Steve Hartono, revealed that the rupiah’s instability actually ruins long-term calculations for investors, particularly regarding the Return on Investment (ROI). “When the rupiah is fluctuating like this, foreign investors will not enter immediately. Even though they see a cheap rupiah, they are actually calculating how low it can go. If they buy now and the rupiah continues to weaken, they will lose even more. Moreover, if the property is leased back, the ROI does not add up when converted to dollars,” Steve told CNBC Indonesia on Thursday (9/7/2026). The industrial sector is typically the last to be touched by foreign investors when entering a country. They usually go through a long adaptation cycle before daring to inject large capital for factories or land. “Foreign investors do not come directly looking for factories. They go through a cycle first; staying in hotels, talking to corporate lawyers or local entrepreneurs for joint ventures. Then they rent service apartments, move to service offices for a small team, and only then look for a large office. Finally, once they are confident in the political and economic stability in Indonesia, they invest in a factory,” he explained. Consequently, the industrial sector is the most vulnerable to the psychological impact of the current macroeconomic uncertainty. If this condition continues, it is feared that investors will avoid long-term commitments. “The industrial sector is the most vulnerable of all to this rupiah weakening. If the rupiah continues to weaken, people will not look long-term. In the end, everyone says ‘I will just rent a factory’. That is what we do not want. We want them to buy land, not just keep renting and then be able to exit tomorrow,” Steve stressed. Although the industrial market is generally restrained, there is still movement in the logistics warehouse and ready-built factory subsectors. Interestingly, this activity is dominated by Chinese corporations. This occurs because the domestic economic conditions in their home country are slowing down, making them aggressive in seeking opportunities in emerging markets like Indonesia, which still offer double-digit profit margins. “Currently, the focus is solely on Chinese companies. Their economy is slowing down, while in Indonesia the margins they can obtain are still good. However, because they want everything fast and tend to minimise long-term risk, they are turning to warehouse developers or ready-to-use factories,” said Steve. As a note, the Garuda currency opened in the red zone against the US dollar this morning. Referring to Refinitiv data, at the opening of trading on Thursday (9/7/2026), the rupiah started trading depreciating by 0.33% or weakening to the level of Rp18,050/US.Withthisopening, therupiahagainbreachedthepsychologicallevelofRp18, 000/US. This position occurred after the rupiah weakened 0.11% to the level of Rp17,990/US$ at the last closing.