JAKARTA Jan 22 Indonesia is aiming to increase
foreign direct investment by 23 percent this year, after record
inflows in 2012 helped insulate Southeast Asia's largest economy
from a slowdown in exports.
Direct investment in the final quarter of 2012 rose 23
percent to 56.8 trillion rupiah ($5.91 billion), taking full
year FDI up 26 percent to around $23 billion, the country's
investment board said on Tuesday.
Strong investment was driven by the mining, transport and
chemicals sectors, showing firms shrugged off worries over
policy uncertainty, corruption and weak infrastructure to seek
returns in an economy growing at more than 6 percent.
"Investors at home and abroad have responded positively to
efforts to improve the investment climate by central and
regional government, more attractive investment incentives and
integrated campaigns," said Chatib Basri, the country's
investment chief, at a news conference.
Foreign inflows to the G20 economy have increased
significantly since Indonesia regained investment grade status
from two rating agencies a year ago. Investment makes up around
30 percent of the G20 economy.
Though the headline figure was far smaller than the $111.7
billion in FDI that China attracted in 2012, Indonesia remained
attractive to foreign investors compared with its Southeast
Asian neighbours. Vietnam, for example, estimated its FDI fell
by 5 percent to $10.46 billion in 2012.
Basri did not give details on the firms investing. Mining
was the biggest sector, despite a series of new rules that
limited foreign ownership and restricted exports. Freeport
McMoran Copper & Gold Inc is the biggest existing mining
Indonesia is keen to draw investment in transport to improve
strained infrastructure from airports to railways, and wants
investment in chemical manufacturing to turn the country's oil
and natural gas output into higher value products.
L'Oreal, the world's top cosmetics group, opened
its biggest factory globally in Indonesia this year, one of many
consumer firms eyeing spending by the country's emerging middle
class. L'Oreal sees sales in Indonesia growing 30 percent this
year to make it the firm's fastest growing Asian market.
The investment board recently approved a licence for tech
giant Apple to open official stores in Indonesia, Basri
said. Basri told Reuters last year that he was confident as the
country had $75 billion of FDI in the pipeline.
The increases in FDI have had an negative side, leading the
country into a wider current account deficit as a result of
surging imports of capital goods and raw materials and falling
commodity exports and putting pressure on the rupiah.
While direct investors pour into the country and the stock
market hit a record high this month, portfolio investor
sentiment has turned more neutral or bearish because of the
rupiah, with increased trading on offshore currency derivative
markets to hedge bets on rupiah assets.
The government and the central bank last week instructed
state-controlled oil and gas firm PT Pertamina to stop buying
dollars from the open market, an effort to support the currency,
which was Asia's worst emerging market performer last year.
Nissan Motor Co, among many automakers expanding
production in the country, said recently the rupiah was a worry
for its economic outlook for the country.
Sharp hikes in minimum wages are also a concern for labour
intensive industries such as textiles, footwear and plantations.
Some South Korean investors have closed down factories to
relocate to other countries after the government declined their
requests to be exempted from the wage hike regulations, the
Jakarta Post newspaper reported on Monday.
But Basri said there were no companies that had notified him
they wanted to withdraw investment from Indonesia.
"We don't expect foreign investors to stop coming into
Indonesia, especially noting the fact that infrastructure
upgrades are ongoing in the country over the next three to five
years," said Gundy Cahyadi, an economist at OCBC in Singapore.
"What's more important for the country is that there is a
need to continue enhancing workers productivity, especially in
the manufacturing sector, which has been a laggard relative to