Photographer: Rony Zakaria/Bloomberg

Foreign Investment in Indonesia Rises as Jokowi Seeks Reform

  • Foreign investment up 3% in 2015 after accelerating in 4Q
  • Indonesia plans to change rules restricting foreign investment

Foreign direct investment in Indonesia picked up last quarter, a sign President Joko Widodo’s reforms may be starting to increase interest in Southeast Asia’s largest economy.

Investment from overseas rose to $7.9 billion in three months through December, up 7 percent from the previous quarter, the Investment Coordinating Board said in Jakarta on Thursday. It rose 3 percent in 2015 to $29.3 billion, after stagnating in 2014.

Stung into action by a decline in the rupiah, slumping demand for the country’s commodities and the slowest economic growth since 2009, Widodo, known as Jokowi, reshuffled his cabinet in August and began a series of reforms aimed at making it easier to do business. While those measures have improved sentiment, fixing the red tape, corruption and lack of legal certainty that have long put off investors will probably take time.

“There is positive movement but you can’t expect things to happen overnight,” said Vishnu Swaroop Baldwa, president director of PT Indo-Rama Synthetics, a textile company that has invested $350 million in Indonesia over the last five years. “The political will is there and I think the bureaucracy is following that, but there is a lot more which can be done,” he said earlier this month.

Indonesia aims to complete by March a revision of its rules that regulate which industries foreigners can invest in. That is expected to include allowing 100 percent foreign investment in the film industry, restaurants and large e-commerce sites, while maintaining restrictions in industries such as banking, according to recent comments by the investment board.

The data released Thursday doesn’t include investment in the oil, gas and banking sectors. Oil and gas investment was $13.6 billion in the first 10 months of 2015, short of the government’s full-year target of $23.7 billion, according to energy ministry data.

In rupiah terms, using an exchange rate of 12,500 a dollar, foreign investment rose 19.2 percent last year. Total investment, including from domestic sources, rose 17.8 percent to 545.4 trillion rupiah, beating the board’s target. The government is optimistic it can achieve total investment of 594.8 trillion rupiah this year, said Franky Sibarani, chairman of the agency known as BKPM.

The maritime industry more than doubled its investment value in rupiah terms last year, while investment from labor intensive industries fell 12 percent, the board said. Minimum wages have risen more than 10 percent annually in recent years.

Before it's here, it's on the Bloomberg Terminal.