Having suffered from the global recession of 2009, FDI flux into Indonesia have experienced marked growth in 2011 and their base expanded. In 2013, FDIs grew at a record pace, by 22.4% compared to 2012 and the country expects a 15% increase in 2014 as well. However, the recently adopted protectionist measures (restriction of employment for foreigners, restriction of foreign stakes in local banks) could have negative impact on FDI inflows. According to the UNCTAD 2013 World Investment Report, Indonesia is one of the five most attractive destinations for multinational companies of 2013-2015, ranking 4th before Brazil. In terms of FDI influx, Indonesia ranks 4th among East-Asian countries, after China, Hong Kong and Singapore.
Strengthening the political and economic stability has removed some investment risk and improved the overall atmosphere on the market. However, some obstacles remain, such as the rising cost of credit, poor investment climate, excessive and the unpredictable nature of regulation, poor infrastructure, the control of the risk of terrorism and a high level of corruption. The entity responsible for investment licenses is the Investment Coordinator Board (BKPM).
|Indonesia||East Asia & Pacific||United States||Germany|
|Index of Transaction Transparency*||10.0||5.0||7.0||5.0|
|Index of Manager’s Responsibility**||5.0||5.0||9.0||5.0|
|Index of Shareholders’ Power***||6.0||9.0||5.0|
|Index of Investor Protection****||6.0||5.4||8.3||5.0|
Source: Doing Business - Last Available Data.
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.
|Foreign Direct Investment||2011||2012||2013|
|FDI Inward Flow (million USD)||19,241||19,138||18,444|
|FDI Stock (million USD)||184,804||211,900||230,344|
|Performance Index*, Ranking on 181 Economies||72||-||-|
|Potential Index**, Ranking on 177 Economies||9||-||-|
|Number of Greenfield Investments***||156||172||154|
|FDI Inwards (in % of GFCF****)||7.1||6.6||6.4|
|FDI Stock (in % of GDP)||21.8||24.1||26.5|
Source: UNCTAD - Last Available Data.
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.
In 2006, the government launched a program for the improvement of the investment climate: bill on investment, drawing up of a new negative list applicable on investments, drastic reduction of the time required for the creation of a company, acceleration of the re-examination process of local regulations likely to harm the enterprising spirit, as well as rationalization of customs procedures and 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.
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Last Updates: February 2015