Indonesia’s FDI troubles

Largest ASEAN economy claims economic prowess but foreign investors remain unconvinced

When Indonesia’s Investment Coordinating Board (BKPM) rejected some 6,541 foreign investment permits last month, it underscored a problem Indonesia has been facing for a couple of years. Investors are looking at the country. They are scouting deals. They are searching for opportunities. They are not always investing, though.

Last year Indonesia attracted around US$24 billion in foreign investment but that is about a quarter of the total investment that China attracts and less than half of what Brazil receives, reports MNI’s Asia Insight. For the country to maintain levels of economic growth of close to 6% per year, it will need a lot more investment.

Indonesia has a lot going for it. It has a large population of around 250 million. It has a growing middle class. It has a young workforce. It has natural resources. It has a new and dynamic president with a large popular mandate. It has political stability.

It also has a lot of hurdles. It has a lot of red tape. Infrastructure is famously weak – which means that getting product for Point A to Point B is both difficult and expensive. There are also large protectionist factions.

The government of President Joko Widodo (better known as Jokowi) is now working hard to convince investors that Indonesia is ready to receive them. It is doing this by making it easier for investors to undertake business in the country by streamlining permits and licenses, curbing corruption and travelling abroad in search of more and better investors.