Top contributing sectors and investors
As an overview of the current investment climate, it was revealed that the year-on-year growth of 22.3 per cent was a result from IDR678.7 trillion (approximately US$42 billion) in first semester of 2023 to IDR829.9 trillion (US$52 billion) in the first semester of 2024.
The countries that contributed the most to foreign investment in the first semester of 2024 are Singapore, China, Hongkong, the United States (U.S.), Japan and South Korea. Furthermore, the sectors with the largest foreign direct investment during this period are (i) basic metal, metal goods, non-machinery and equipment industry; (ii) services; (iii) mining; (iv) electricity, gas and water; and (v) chemical and pharmacy industry.
Downstreaming plays a crucial role in boosting investment in Indonesia, with investments in this sector valued at IDR181.4 trillion (approximately US$11 billion) across various industries, including minerals, forestry, agriculture, oil and gas (petrochemical), and electric vehicles.
Factors driving investment growth
The constant investment growth in Indonesia is being driven by several key factors including strategic initiatives and favourable policies. The government has taken a proactive approach in showcasing investment opportunities on the global stage, actively courting foreign investors to participate in the country's economic growth. Furthermore, Indonesia has forged crucial strategic partnerships with nations like the U.S. and Singapore, aimed at bolstering foreign direct investment.
Another significant contributor to this positive investment climate is the Online Single Submission (OSS) system, which has proven to be a game-changer in streamlining the often-complex process of obtaining permits and licences. This digital platform has substantially reduced bureaucratic hurdles, making it easier and more efficient for both domestic and international investors to establish and operate businesses in Indonesia.
Additionally, the government has implemented a range of attractive fiscal incentives across various business sectors. By offering these financial benefits, Indonesia is effectively positioning itself as a competitive and investor-friendly market in the region.
What’s next?
The Minister expressed confidence that Indonesia will achieve its ambitious 2024 investment target of IDR1,650 trillion (approximately US$103 billion). To accelerate investment growth in the latter half of 2024, Indonesia is set to participate in the comprehensive strategic partnership between ASEAN and Australia, currently in the planning stages. This partnership emphasizes economic cooperation, aiming to stimulate investment growth and create new opportunities.
Furthermore, the government is in the final stages of revising Government Regulation No. 5 of 2021 on Risk-Based Business Licensing. Public consultations have been conducted to gather stakeholder feedback, with the goal of enhancing the investment climate and streamlining business processes.
Authored by Mochamad Kasmali, Karina Antonio, Yosephine Grace, and Nigel Sharman.
