Indonesia Missing Turnaround With Foreign Investment Stagnating

Foreign direct investment in Indonesia stagnated last quarter, indicating President Joko Widodo has yet to engineer a turnaround for an economy growing at its slowest pace in more than five years.

Investment from overseas was $7.4 billion in the three months through June, little changed from a year earlier in dollar terms, the Investment Coordinating Board said in Jakarta Monday. Total investment, including from domestic sources, rose 16.3 percent to 135.1 trillion rupiah, or $10 billion based on the current exchange rate, compared with a 16.9 percent gain in the first quarter.

The president, known as Jokowi, needs foreign and local companies to help upgrade the country’s power stations, roads and other infrastructure needed to spur Southeast Asia’s largest economy. Weakening domestic consumption, a falling rupiah and some government policy flip flops may have reduced the incentive for investors to come in.

“FDI investors are still waiting cautiously,” said Eric Alexander Sugandi, an economist for Standard Chartered Plc in Jakarta. “If the government can really boost growth in 2H 2015, then FDI investors’ mood may improve.”

Domestic investment rose 12.3 percent year-on-year. Projects included a $327 million smelter investment that started on Halmahera island, said Azhar Lubis, a deputy chairman at the board.

Malaysia led foreign investment, followed by Singapore and Japan, with transportation, storage and telecommunications attracting the most interest. Domestic investors poured most money into the food industry and utilities, Lubis said.

Jokowi, a furniture exporter before he entered politics, has pledged to make it easier to do business in the country, but progress has been slow. Corruption, conflicting regulations and difficulties in getting permission to start work have long hampered companies.

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