Indonesia Records 30.3% Increase In FDI In 1Q
First Published Monday, 23rd April 2012 05:05 am - © 2012 Dow Jones
-- Foreign direct investment rose 30.3% on year to IDR51.5 trillion in the first quarter
-- Investment by local investors increased 39.7% on year to IDR19.7 trillion
-- World Bank earlier warned that recent restrictive measures on investment and trade may affect longer-term investment inflows
(Adds background in the 4th, 6th through 9th paragraphs; quote by the investment board chairman in the 5th paragraph; further FDI details in the 10th and 11th paragraphs; economist's comment in the 12th paragraph.)
By I Made Sentana
Of Dow Jones NEWSWIRES
JAKARTA (Dow Jones)--Foreign direct investment in Indonesia rose by 30.3% in the first quarter from a year earlier to IDR51.5 trillion ($5.6 billion), the Investment Coordinating Board said Monday, as the country was boosted by two international credit rating firms' decision to raise Indonesia's rating to investment grade for the first time in 14 years.
Actual investment by local and foreign companies--money already delivered, as opposed to merely pledged--rose 32.8% during the period to IDR71.2 trillion, the investment board said Monday.
The board also said local companies spent IDR19.7 trillion during the January-March period, up 39.7% from a year earlier.
The data come amid a lack of progress in the government's efforts to improve its poor infrastructure for access to vast natural resources and its growing consumer market, showing that investors are willing to overlook such concerns.
"Despite the slowdown in some countries such as the U.S. and Europe, investment activities in Indonesia continued to grow robustly. It shows that the policies taken (by the government) so far are on the right track and the investment climate in Indonesia is getting more conducive," Trade Minister Gita Wirjawan, who is also head of the investment board, said at a press conference.
Rising investment is expected to help Southeast Asia's largest economy continue expanding at a healthy clip this year as the global slowdown is hurting its exports--another important growth contributor.
After Indonesia's economy expanded 6.5% last year--its fastest growth since 1996--the World Bank projected it to grow 6.1% this year.
However, the bank warned earlier this month that a string of restrictive changes to regulations regarding trade and foreign investment policies may have significant longer-term implications affecting growth and investment, even if they may not have an immediate impact.
The government recently ruled that foreign investors must divest 51% of ownership in local mines to local entities by the tenth year of operation. The government has also said it would ban exports of some raw minerals including copper, iron, nickel and bauxite early next month, although it may introduce a tax that would allow exports until 2014.
The investment board said $1.1 billion in FDI went to the mining sector during the first three months of the year, followed by $800 million for transportation and telecommunications, and $500 million for plantations.
It added that $1.2 billion of FDI during the period came from Singaporean investors, $600 million from Japanese and $500 million from South Korean investors.
Besides being a driver of growth, the upward trend in FDI will be supportive of the rupiah amid a deteriorating current account balance and "choppy" portfolio flows, said OCBC economist Gundy Cahyadi.
-By I Made Sentana, Dow Jones Newswires; +62 21-39831277; email@example.com