FDI in Indonesia
FDI in Figures
Foreign direct investment (FDI) in Indonesia, which had collapsed due to the Asian economic crisis in 1997-1998, was evidently increasing since 2007, the country had become attractive to investors again thanks to the progress of the business regulation framework. The flows of FDI have, nevertheless, suffered from the global recession in 2009 and even if they have started to increase again in 2010, they still remain insufficient considering the size and the potential of the country's economy. The reinforcement of political and economic stability has suppressed certain investment risks and has improved the market tone. But some restraints still persist, such as the high cost of credit, the poor investment climate, the excessive weight and unpredictability of regulations, the poor condition of the infrastructures, the control of terrorist risk and the high level of corruption.
|Foreign Direct Investment||2007||2008||2009|
|FDI Inward Flow (million USD)||6,928||9,318||4,877|
|FDI Stock (million USD)||79,927||67,964||72,841|
|Performance Index*, Ranking on 141 Economies||120||109||119|
|Potential Index**, Ranking on 141 Economies||93||85||-|
|Number of Greenfield Investments***||82||132||117|
|FDI Inwards (in % of GFCF****)||6.4||6.6||8.4|
|FDI Stock (in % of GDP)||18.5||13.3||13.5|
Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.
FDI Inflows By Countries and Industry
|Main Investing Countries||2009, in %|
|Main Invested Sectors||2009, in %|
|Transport, storage and communications||38.6|
|Chemical and pharmaceutical industries||10.9|
|Trade and repairs||6.5|
|Metallurgy, machinery, electronics||6.0|
|Motorized vehicles and other types of transport||5.4|
- Form of Company Preferred By Foreign Investors
- As a general rule, foreigners can only invest through setting up a limited liability company (Perseroan Terbatas or PT). A PT can be a joint venture set up by a foreign investor and an Indonesian partner, or a company whose ownership is exclusively foreign and in which foreign holdings can reach 100%.
- Form of Establishment Preferred By Foreign Investors
- A company is the favored form of setting up business.
- Main Foreign Companies
- Total, Shell, British petroleum, Credit Lyonnais, ING Bank, ABN Amro Bank, Nike, Reebok, Adidas, Carrefour, Danone, Accor...
- Sources of Statistics
Bureau for the coordination of investments (BKPM)
Institute of statistics (BPS)
Why You Should Choose to Invest in Indonesia
- Strong Points
- Indonesia has almost 230 million inhabitants, which represents an enormous market. Additionally, the country has abundant natural resources (timber, fish, oil, natural gas, metals) and enourmous biodiversity.
- Weak Points
- The main hindrance to investment lies in the high cost of illegal deductions, which can be as much as 60%. For the procedures of starting a company - the number of formalities to carry out, time limits for starting up, registration rules and the threshold of the initial capital - a World Bank study has shown that Indonesia is less efficient than other Asian countries. Legal unpredictability is often denounced and several levels of justice are said to be ineffective and corrupted. The tax and customs authorities are still viewed, in the business circles, as generally being corrupted and arbitrary.
- Government Measures to Motivate or Restrict FDI
- Incentives to investment are accessible to all investors, national and foreign. More specifically, these are reductions of duties on imports and equipment goods and additional incentives for export investors and investments made in certain regions.
At the beginning of 2006, the government announced a program for the improvement of the investment climate, which aims to submit to Parliament a bill on investment, the drawing up of a new negative list applicable on investments, the drastic reduction of the time required for the creation of a company, the acceleration of the re-examination process of local regulations likely to harm the enterprising spirit, as well as the rationalization of customs procedures and the improvement of customs regulations. A privatization program mainly concerning key sectors such as transport and finance and which was initiated in 1998, is regularly updated.
Any Comments About This Content? Report It to Us.
Investors continue to encounter a wide range of business problems in Indonesia, including weak contract enforceability, poor infrastructure, labor market rigidities, the absence of a transparent and predictable regulatory environment
U.S. Commercial Service Poland on 3 Mar 2010 related to FDI in Indonesia
U.S. Department Of Commerce, Indonesia