Esther Samboh, Jakarta – Investment rose in the third quarter on business confidence that Indonesia's economy will remain resilient amid global financial turmoil, with Singaporean investors taking the lead.
The Investment Coordinating Board (BKPM) announced on Thursday that the realized investment of both domestic and foreign entities in Indonesia jumped 15.3 percent to Rp 65.4 trillion (US$7.26 billion) in the July-to-September period, driving total investment in the first nine months of the year to Rp 181 trillion.
Total investment between January and September was up 20.9 percent from the same period last year, comprising 75.4 percent of the BKPM's full-year target of Rp 240 trillion. "We are upbeat on reaching the target, or even surpassing it," BKPM deputy chairman Azhar Lubis told reporters in his office in Jakarta.
Foreign direct investment (FDI) comprised Rp 46.4 trillion, more than 70 percent, of overall investment in the third quarter, the BKPM said.
Singaporean investors accounted for $1.31 billion of overall investment, about 25 percent, while the United States, the Netherlands, South Korea and Japan, boosted their spending in Indonesia by more than $400 million. Most foreign investors increased spending in transportation, telecommunications, mining, base metals, machinery and electronics in Banten, Jakarta and West Java.
Domestic investors spent Rp 19 trillion, accounting for a 30 percent share of total investment, up from 14.5 percent in the same period last year, and focused on the forestry, electricity, gas, water and paper and printing sectors in East Java, Jakarta and West Java. "Investors really don't have any other alternatives. Indonesia is the only big market that has not yet suffered overheating, as indicated by its declining inflation," Aviliani, an economist at the Institute for Development of Economics and Finance, said.
Indonesia, which relies heavily on consumption driven by its population of almost 240 million, saw inflation ease to 4.61 percent in September from 7.02 percent at the beginning of the year.
Despite overall growing interest from foreign investors, FDI growth in the third quarter grew by 15.7 percent, slower than the 21 percent recorded in the second quarter, signaling a potential speed bump for foreign investment amid fears the eurozone debt crisis might affect global economy.
Bank Central Asia (BCA) economist David Sumual said the situation might not be resolved quickly. "There's a possibility that foreign investors might go into a wait-and-see mode. They are calculating if the crisis will continue or not." However, David said, Indonesia would continue to attract FDI given the nation's strong economic fundamentals.
Indonesia's economy grew at over 6 percent for the past two years, amid slowdowns overseas and increased investment and rising domestic consumption. "Investors are factoring in macroeconomic stability, demographics and political stability," David said.
David and Aviliani agreed that government needed to do several things to boost investment in Indonesia, including developing infrastructure, reducing regulatory bottlenecks, and reforming downstream businesses and land procurement.