Foreign Direct Investment

FDI by sector – Foreign Direct Investment in Indonesia stood at US$ 31.1 billion for the year 2021 with the ‘Metal, Machinery and Electronic’ industry drawing the most attention from investors. Chart 1 lists the five main invested sectors of Indonesia in 2019 with their respective shares of FDI inflows while chart 2 lists the five main investing countries in 2019. Even though Indonesia has made tremendous headway in technological advancements, we see that foreign investment is still focused primarily on its traditional industries. Furthermore, data indicates that Indonesia’s regional peers continue to be the ones most keen on investing in it but as Indonesia grows into an economic powerhouse it will sufficient opportunities for an increased western presence.

Chart 1

Chart 2

Special Economic Zones – Given that Indonesia is so geographically dispersed foreign investors deliberate on where to invest. To help answer this question the Government has designated 11 Special Economic Zones (SEZ), as seen in the map below. This map not only specifies the locations of these SEZs but also serves as a guide on how and where to invest.

FDI growth over time – FDI net inflows into Indonesia have grown significantly over time. As shown in the chart below, net inflows of FDI have grown from US$ 5 billion in 2009 to US$ 31.1 billion in 2021, and apart from 2016 & 2018, foreign direct investment has been stable and high every year.

However, Indonesia’s rising stature in the eyes of investors is truly represented in the figure below, which displays its FDI inflows relative to other attractive emerging economies in South East Asia. This data indicates that Indonesia has consistently been the market of choice for investors, with Vietnam following closely on its heels.