Dion Bisara – Foreign direct investment in Indonesia accelerated in the final quarter of last year due in part to investment in the metal, machinery and electronics industries.

FDI hit a record Rp 221 trillion ($23 billion) last year, up 26 percent from 2011, the Investment Coordinating Board (BKPM) announced on Tuesday. In the fourth quarter, FDI rose 23 percent to Rp 56.8 trillion ($5.9 billion) from the same period in 2011. That compared with a 22 percent gain recorded in the July-September quarter

Investment in the metal, machinery and electronics sectors reached $1.2 billion in the October-December period, while the mining sector held the second spot in investment at $1.1 billion.

The transportation, storage, and communications sectors came in third place with $900 million in investment, followed by the food industry ($600 million) and motor vehicles and other transport equipment industry ($500 million).

Chatib Basri, chairman of BKPM, said the higher trend in investment in value-added sectors was encouraging. "In order to avoid the middle-income trap, Indonesia has to put emphasis on innovation and technology, including in the resource-based sectors," Chatib said on Tuesday.

The middle-income trap refers to an economy that stagnates as it fails to move up to more value-added production. Multinational financial institutions such as the International Monetary Fund and Asian Development Bank have warned that the country risks falling into the trap if it fails to improve its infrastructure.

In terms of province, West Java attracted $1.2 billion in fourth quarter FDI, followed by Jakarta ($1.1 billion), Banten ($900 million), East Java ($900 million), and Papua ($500 million).

Singapore remained the biggest source of investment by country, pumping in $1.4 billion. South Korea came in second with $700 million, followed by Japan ($700 million) and the United States ($500 million).

Total investment – both foreign and domestic – increased 25 percent to Rp 313.2 trillion last year. Chatib said that this year the agency was aiming to increase investment by 38 percent to Rp 390.3 trillion.

With concerns of austerity in Europe and the fiscal problems in the United States, Chatib said that investors would prefer to put their money into emerging countries such as Indonesia, to seek higher returns than in developed nations.

"BKPM and other ministries and local governments are working together to continuously improve the service quality to the investor, simplify and speed up the license service procedure, as well as make sure the completion of infrastructure development is on schedule," Chatib said.