The Paradox of National Economic Independence
Extraordinary and seemingly a source of pride for members of the Merah Putih cabinet after bringing back news of investment agreements from President RI Prabowo Subianto’s overseas visits. The most recent being the trip to Japan and South Korea in early April 2026.
According to Cabinet Secretary Lieutenant Colonel TNI Teddy Indra Wijaya and Coordinating Minister for the Economy Airlangga Hartarto, investment agreements have been reached with both countries worth Rp574-575 trillion (US$33.89 billion).
In addition, the value of investments from Japan since the 1970s and South Korea (starting from the 1990s) in the homeland has been very substantial. Japan, based on data from the Ministry of Investment/BKPM, is one of the major investors in Indonesia, ranking 5th among other countries. The realisation of its investments or Foreign Direct Investment (PMA) in 2025 reached US$31.3 billion or approximately Rp516.45 trillion, focusing on automotive, renewable energy, and manufacturing.
The latest economic cooperation commitment is US$23.1 billion or around Rp390 trillion.
Is this investment cooperation truly an indicator of national leadership success? Especially when linked to the ideals or vision-mission of Asta Cita for national economic independence. Or is this a paradoxical policy? Certainly, the patterns and investment cooperation between the two countries (Government to Government/G to G) and business to business (B to B) must be ensured to be mutually beneficial, useful, and have broad impacts on the national and state economy.
The Small Influence of Foreign Investment
So, what is actually the definition of investment? There are many definitions, but it is best to refer to one from a state institution, namely the Financial Services Authority (OJK). According to OJK, investment is the activity of planting capital or assets into a certain instrument with the hope of gaining profit in the future. That future is usually within one (1) year (short term) or more, 5-30 years (long term).
This means that the main purpose of investment is to obtain profit (return) from the invested funds, whether in the form of interest, dividends, or appreciation of asset value or financial returns.
Calculations of costs and investment risks have certainly been done carefully and meticulously, including by its guaranteeing institutions (insurance). Conversely, what are the benefits and advantages of foreign investment on a sectoral or national and state level?
If foreign investment cooperation is claimed as a success, the measure is not just the nominal value of the investment. Rather, it is also how much economic value added, utility, and welfare it brings to the Indonesian people. Not only building sectoral industries, but it should also create jobs and reduce unemployment and poverty rates.
For example, the realisation of Japanese investment in Indonesia for the period 2021–2025 is recorded at US$17.1 billion or Rp282.15 trillion with an average growth of 13.2%. The results and benefits, according to claims from KemInves/BKPM, include the absorption of 278,887 workers. It turns out that Japan’s 13.2% investment value only impacted a 3.09% reduction in poverty rates.
Meanwhile, South Korea is the 7th largest investing country in Indonesia. Over the last five (5) years (2020–2024), the value of South Korean investment in the form of Foreign Direct Investment (FDI) totalled US$11.3 billion or equivalent to Rp186.45 trillion. The largest investment sectors are the automotive industry (seat covers, headrests, interior linings). There is also manufacturing and construction (coating paste/sealant, adhesives, surface protectors). The job absorption from its investments reached more than 299,149 people from 30,581 projects.
The total investment from both countries recently visited by the President of RI amounts to US28.4billionorapproximatelyRp468.6trillion(1US = Rp16,500). With total job absorption of 578,036 people.
Its influence is also very small compared to the large value of investment planted by both countries. Or, it is not very significant in reducing poverty and unemployment figures. This is the paradox of foreign investment in a capitalist economic system that only creates a trickle-down effect that is minimal.
The small or non-multiplying benefits and impacts that trickle down are caused by the type and pattern of foreign investment. That is, most production uses high technology or is capital intensive, not labour intensive. Even large investment values, whether from the USA, Singapore, Japan, South Korea, and other countries, will not be able to drive economic growth above 5 percent.
Moreover, investments from both countries are still concentrated in the Java Island region, which contributes to population migration issues.
Therefore, there is a need for further study regarding the new investment cooperation agreements from early April 2026. It must be ensured that the benefits and multiplier impacts are significant for the Indonesian economy. In fact, priority projects or investment programmes like Free Nutritious Meals (MBG) provide even greater benefits and impacts to society. Based on data from the National Nutrition Agency (BGN), up to early 2026, MBG has absorbed around 1.4 million direct workers. Whether the BGN data is accurate or not certainly requires further study or research.