The global economic turmoil continues to adversely affect Indonesia’s economy, especially in light of the recent tapering of the bond purchase programme by the US. In addition, the political uncertainties that arise from the coming parliamentary and presidential elections are stirring up the economic and security conditions in Indonesia. As indicated by the Business Tendency Index, business prospects are improving, but it hasn’t been able to drive up investor sentiment. Partly because of the tapering programme and the election uncertainty, foreign investors’ confidence in Indonesia has waned, leading to lower net inflows of foreign direct investment (FDI). According to the Central Bureau of Statistics, total inbound FDI weakened to USD 4.08 billion in the fourth quarter of 2013, a decline of 27.27% year-on-year (YoY) and 29.28% quarter-on-quarter.

Out of this total, countries in Asia contributed the most (99.6%), led by Singapore which poured in USD 2.8 billion throughout the fourth quarter of 2013. Despite the dominance of Asian countries, inward FDI from Japan was drastically reduced to USD 533.94 million, which was 77.95% lower on a YoY basis compared to the USD 2.42 billion that arrived in the fourth quarter of 2012. Likewise, the United Kingdom, the biggest investor among the European countries, contributed USD 274.18 million during the same period, which was a decline from the USD 276.00 million invested in the fourth quarter of 2012. Nevertheless, there are some countries that increased their investment over the same period, such as China which allocated USD 161.49 million, up from USD 121.00 million, and Australia which invested USD 138.83 million compared to USD 81 million.

The declining investment performance overall is expected to hamper export activities in Indonesia. FDI is crucial to enhance export activities, by providing more domestic capital for local companies that can be allocated for export expansion and opening up new international markets. Separate statistics concerning Indonesia’s total annual exports show a fall of 3.94% YoY to USD 182.55 billion in 2013, compared to USD 190.03 billion in the previous year.

Indonesia Premium Database + Investment
	+ Foreign Direct Investment
		+ Table ID.OA001: Foreign Direct Investment + Table ID.OA005: Foreign Direct Investment: by Industry + Table ID.OA006: Foreign Direct Investment: by Country