Mahendra Siregar, Head of the Indonesia Investment Coordinating Board (BKPM) is optimistic that realized investment in Indonesia can reach over IDR 100 trillion (USD $8.6 billion) in the first quarter of 2014, particularly supported by foreign direct investment (FDI) in the country's automotive and electronics sectors. Siregar uttered his optimistic view at the groundbreaking of the new Toyota factory in Karawang (West Java) on Tuesday (25/02). Foreign investors remain buoyant on the potential of Indonesia's rapidly expanding consumer force.
The automotive industry of Indonesia grew significantly in recent years. In the past four years, investments have risen tenfold to USD $3.7 billion in 2013. For example, the new Toyota factory in Karawang, established by Toyota Motor Manufacturing Indonesia (TMMIN), needed USD $197.4 million worth of investments. Besides this Toyota factory, the BKPM received 570 other project proposals from foreign investors and 57 proposals from domestic investors in the country's automotive sector.
In Indonesia's electronics sector robust growth is also detectable as foreign companies are eager to expand their businesses in Indonesia. For example, Sharp Electronics Indonesia has recently opened a new factory (worth USD $103.0 million) in Karawang as well.
Investments in Indonesia's processing industry are also rising. This development is in line with the intention of the Indonesian government to increase revenues from its natural resources. Per 12 January 2014, exports of unprocessed have been banned through the 2009 Mining Law, although under specific conditions raw mineral exports will be allowed up to 2017. This new policy leads to the construction of smelters, which will require significant investments from miners. For the next two to three years, the BKPM has approved the construction of 28 smelters, worth a combined USD $12.9 billion.
The government also uses export tax to stimulate domestic processing industries. For example, the domestic cacao processing industry has seen its production capacity expand fourfold to 400,000 tons in three and a half years time.
Total investments in Indonesia amounted to IDR 398.6 trillion (USD $34.2 billion) in 2013. Siregar expects an increase of 15 percent to around IDR 456 trillion (USD $39.1 billion) in 2014.
Foreign and Domestic Investment in Indonesia (in IDR trillion)
|Domestic Direct Investment||14.1||18.9||19.0||24.0||19.7||20.8||25.2||27.5||27.5||33.1||33.5||34.1|
|Foreign Direct Investment||39.5||43.1||46.5||46.2||51.5||56.1||56.6||65.5||65.5||66.7||67.0||71.2|
Source: Indonesia Investment Coordinating Board (BKPM)