Indonesia: Further decline in FDI – UOB

Economist at UOB Group Enrico Tanuwidjaja and Haris Handy reviewed the FDI figures in Indonesia during the April-June period.

Key Quotes

“Indonesia’s direct investment contracted in 2Q20, as the COVID-19 pandemic batters both the national and global economy. The data from Investment Coordinating Board Indonesia (BKPM) showed foreign direct investment (FDI) fell by 6.9% y/y to IDR 97.6tr (equivalent to USD 6.8bn, using 2020 national budget IDR exchange rate assumption of IDR 14,400 per USD) in the AprilJune period, continuing the downward trend recorded at -9.2% in the first three months in 2020.”

“As the COVID-19 cases continue to rise, Investment Coordinating Board Indonesia (BKPM) reiterated that the board has changed its target for both domestic and foreign investment from IDR 886tr to IDR 817tr in 2020. Despite the Covid-19 Impact, BKPM remains optimistic that FDI would improve in 2H20.”

“Singapore remained the largest foreign investor in Indonesia, with investment valued at USD 2.0bn for 3,860 projects, followed by Hong Kong at USD 1.2bn for 725 projects, and China at USD 1.1bn for 722 projects. By sector, transportation, warehouse, and telecommunication sector were the largest recipients of DDI in 2Q20, valued at IDR 17.7tr.”

“Going forward, we are cautiously optimistic that Indonesia will be able to attract much-needed longer-term investment in the country, after the pandemic is over, given the resilient of the domestic economy. Nevertheless, continuous reforms and policy actions, as well as better ground implementation needs to be ensured to achieve lower perception of risk, higher and stickier investment in the future.”