Foreign direct investment (FDI) this year is projected to grow only by 15 percent, year-on-year, lower than 2013’s 26.1 percent. Mahendra Siregar, Head of Investment Coordinating Board (BKPM), said this year’s FDI is decelerating because it is already growing, compared to in 2010 when foreign direct investment value was still very low. “When we have been through high growth, it is reasonable if the trend is subsiding. This certainly will be in line with its rising capacity hence more sustainable. This is natural hike thus it is not only a matter of growing but investment quality is more important as well,” Siregar added. Meanwhile, in the fourth quarter of 2013, FDI climbed 25.4 percent, up again after having experienced a fall in the past two quarters. The rise is driven by Indonesia’s recovering economic fundamentals, thus, boosting foreign trusts. David Sumual, economist from PT Bank Central Asia Tbk (BBCA), said since Indonesia’s rating was upgraded to BB- (double B minus) foreign direct investment significantly jumped. Moreover, the government’s ban on raw mineral export boosts foreign direct investment. However, investment tends to grow more slowly following economic slowdown. This investment downtrend is likely to continue this year because of general elections. Sumual said foreign investors will tend to wait and see watching the next government’s policy direction. Moreover, as of now revision on negative investment list (DNI) has yet to be issued. “This will cause investors reconsider as it is promised to be released by December, while as the end of January is approaching there is still no update,” Sumual said. Despite foreign investors’ tendency for waiting and seeing, local investors will tend to be aggressive in this political year. Sumual said this is driven by good opportunity in domestic investment particularly in retail and consumption sectors for general elections. Several sectors which will grow quite high this year are manufacturing, infrastructure and consumer goods. With positive growth in domestic capital investment, the government should give some incentives. 2013 Realization In contrast to FDI which begins subsiding, domestic investment tends to rise. Siregar said 2013’s domestic investment growth of 39 percent is the highest since 2010. Moreover, there is growing trend from investment in manufacturing sector such as water and electricity. 2013’s domestic investment realization was dominated by five sectors including electricity, gas and water (Rp 25.8 trillion or US$ 2.14 billion), mining (Rp 18.8 trillion) and food industry (Rp 15.1 trillion). Meanwhile, investment realization in 2013 reached Rp 398.6 trillion, climbing 27.3 percent from 2012. The realization comprises FDI amounting to Rp 270.4 trillion and domestic investment Rp 128.2 trillion. Azhar Lubis, Deputy of Capital Investment Control at BKPM, said there was a rising trend in domestic investment in the past few years. This is because domestic investors begin seeing opportunities and domestic need. However, the rise does not mean to shift foreign portion in Indonesia since value-wise, foreign investment remains quite high albeit decelerating. Lubis added this year’s general elections will not cause investment both foreign or domestic decelerates since this is not the first general elections. Lubis said what investors always anticipate is the certainty in investment climate and regional security.
