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In this page: FDI in Figures | Why You Should Choose to Invest in Indonesia | Procedures Relative to Foreign Investment | Investment Opportunities

 

FDI in Figures

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).

 

Country Comparison For the Protection of Investors

  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 201120122013
FDI Inward Flow (million USD) 19,24119,13818,444
FDI Stock (million USD) 184,804211,900230,344
Performance Index*, Ranking on 181 Economies 72--
Potential Index**, Ranking on 177 Economies 9--
Number of Greenfield Investments*** 156172154
FDI Inwards (in % of GFCF****) 7.16.66.4
FDI Stock (in % of GDP) 21.824.126.5

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.

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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 enormous biodiversity. Internal demand is growing due to the development of the middle class.
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.

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.

Bilateral Investment Conventions Signed By Indonesia
Indonesia has signed bilateral agreements for the protection of investments with 57 countries, listed here.

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Procedures Relative to Foreign Investment

Freedom of Establishment
Not guaranteed
Acquisition of Holdings
A majority holding interest in the capital of an Indonesian company is legal, except in certain sectors of activity.
Obligation to Declare
The agency for the promotion of foreign investment in the country allows you to obtain information about the necessary authorizations for setting up business in Indonesia.
Competent Organization For the Declaration
Agency for the control of food and drugs (BPOM)
Bureau for the coordination of investments (BKPM)
Requests For Specific Authorizations
A list of sectors which are closed or partially open under certain conditions to foreign investment is available in the Indonesia's Investment Law.

Learn more about Foreign Investment in Indonesia on Globaltrade.net, the Directory for International Trade Service Providers.

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Investment Opportunities

Investment Aid Agency
Board of Investment of Indonesia
Tenders, Projects and Public Procurement
Tenders Info, Tenders in Indonesia
Asian Development Bank, Procurement Plans in Asia
DgMarket, Tenders Worldwide
Other Useful Resources
Indonesian Chamber of Commerce and Industry
 
 

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Learn more about Investing in Indonesia on Globaltrade.net, the Directory for International Trade Service Providers.

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Last Updates: February 2015