Indonesia, Southeast Asia’s largest economy, is emerging as a stable ground for investment as much of Asia experiences an economic slowdown, the head of the country’s investment board said.
Indonesia is the “least unattractive country” in the region as economic growth in China, Japan and India cools, Chatib Basri, chairman of Indonesia’s Investment Coordinating Board, said at a forum in Washington yesterday. Foreign direct investment in the first half of the year was $12 billion, on track to reach as much as $25 billion by year’s end, he said.
Companies such as Toyota Motor Corp. (7203) and Taiwan’s Foxconn (2038) Technology Group are mulling investment opportunities in Indonesia, and next month L’Oreal (OR) SA will open a cosmetics factory there, Basri said. Indonesia plans to boost total investment by at least 72 percent over the next two years.
A young working population, stable political situation and healthy debt-to-gross domestic product ratio are among attractions for investment in Indonesia, he said. Still, the country faces headwinds in developing infrastructure and education and mitigating corruption, as well as fallout from global economic cooling.
“All the situations in the global economy could change at any time,” Basri said.
President Susilo Bambang Yudhoyono is increasing spending on roads, seaports and airports as he woos investment to spur growth. More than a decade after the Asian financial crisis forced the nation to seek an IMF bailout, Fitch Ratings and Moody’s Investors Service have raised Indonesia to investment grade and the country’s growth is among the fastest in the Group of 20 nations.
Bank Indonesia kept its benchmark interest rate at a record low 5.75 percent for a seventh straight meeting in September as accelerating economic growth and inflation reduced the scope for monetary easing to counter an export slump.
Indonesia joins South Korea and Malaysia in preserving firepower this month as the European Central Bank backed unlimited purchases of government debt to resolve the region’s crisis and the U.S. Federal Reserve announced a third round of quantitative easing. A declining rupiah and rising food costs are adding to price pressures in Indonesia, where growth has exceeded 6 percent since 2010.
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