Finance minister - and former head of the BKPM - Chatib Basri noticed a remarkable trend (that is visible in the table below). Annual growth of FDIs has slowed down in the first six months of 2013, while DDIs have jumped in the same period.

Foreign and Domestic Investments (in IDR trillion)

        2011
Semester I
      2012
Semester I
      2013
Semester I
Domestic Direct Investment       33.0       40.5       60.6
Foreign Direct Investment       82.6      107.6      132.2
Total Investment
     115.6      148.1      192.8

Foreign and Domestic Investments (annual percentage change)

       2011
Semester I
     2012
Semester I
     2013
Semester I
Domestic Direct Investment     50.7%     22.7%     49.6%
Foreign Direct Investment     16.3%     30.2%     22.8%
Total Investment
    24.4%     28.1%     30.2%

Source: Indonesia Investment Coordinating Board

"FDIs have begun to slow down. This is the result of high economic growth. Domestic investors' share towards total investments has grown at the expense of foreign investments' percentage share," said Chatib Basri.

Slowing FDIs have been discernible since last year. Although in absolute terms its value has increased, its movement is rather slow. This development is in contrast with DDIs, where the increase has been rapid:

Foreign and Domestic Investment Realization (in IDR trillion)

    Quarter I
     2012
  Quarter II
     2012
  Quarter III
      2012
  Quarter IV
      2012
  Quarter I
     2013
  Quarter II
     2013
DDI      19.7      20.8       25.2       26.5      27.5      33.1
FDI      51.5      56.1       56.6       56.8      65.6      66.7

Chatib Basri also said that domestic investments usually grow after foreign investments have increased. This development is because of new industries that develop around a foreign industry. For example, after a foreign investor opens an automotive factory, domestic investors will open spare parts industries. As such, new industries evolve around a foreign investment. This shows the importance of foreign investments.

However, despite the positive trend, there are some concerns regarding investments in Indonesia. One is the uneven distribution pattern of investments in terms of geography. According to the data supplied by the BKPM, investments on the island of Java (Indonesia's most populous island) have increased at the expense of the other islands. The explanation behind this is that investments outside Java are more focused on natural resources and commodities. Thus, when commodity prices weaken, investment realization outside Java will fall accordingly. Investments in Java are more focused on the manufacturing (particularly the automotive sector) and consumer industries. As these industries have grown sharply, so do investments on Java.

Geographical Investment Realization Semester I-2013

Island      Investment
  (in IDR trillion)
   Percentage Share
Java
         109.5              56.8%
Sumatra           27.1              14.1%
Kalimantan
          25.5              13.2%
Moluccas and Papua           14.8               7.6%
Sulawesi
          10.3               5.4%
Bali and Nusa Tenggara            5.6               2.9%

Chatib Basri reminded that investments in Semester II-2013 will face challenges, both domestic and foreign challenges. Reduced liquidity in a number of countries (for example the possible end of America's quantitative easing program) will be felt in Indonesia. Domestically, higher interest rates and inflation will make an impact on investment realization. This impact was not felt in Semester I-2013.

Another change is visible in the source of investments. Previously, Singapore was the largest foreign investor in Indonesia. However, its leading position has now been taken-over by Japan:

        Investment
   (in USD billion)
Japan
            2.3
Singapore             1.9
USA
            1.3
South Korea             1.2
England
            0.6

Source: Indonesia Investment Coordinating Board

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