BKPM Chairman Franky Sibarani is content to see the Q1-2016 FDI data and attributed the investment growth to the government's economic policy packages. The Indonesian government has been implementing reforms through a set of economic policy packages that include tax incentives and deregulation (between September 2015 and March 2016 the government has unveiled 11 packages; see the table at the bottom of this webpage). Sibarani added that direct investment in Indonesia in the first quarter has created nearly 330,000 new jobs.

Sibarani also informed reporters that the proportion of direct investment outside the island of Java rose from 43.9 percent in Q1-2015 to 44.9 percent in Q1-2016 in line with government efforts to create a more equally divided investment distribution across Indonesia. This will help to turn Indonesia into a more equal society.

Read more: Indonesia's Gini Ratio Fell in 2015; Concerns about Social Cohesion Persist

However, on a quarter-to-quarter basis, it was the first time since Q4-2011 that FDI realization in Indonesia eased.  FDI realization of IDR 96.1 trillion in Q1-2016 was below the IDR 99.2 trillion FDI realization in the preceding quarter.

Foreign and Domestic Investment in Indonesia (in IDR trillion):

                            2015 2016
  Q1   Q2   Q3   Q4   Q1   Q2   Q3   Q4   Q1
Domestic Direct
 34.6  38.2  41.6  41.7  42.5  42.9  47.8  46.2  50.4
Foreign Direct
 72.0  78.0  78.3  78.7  82.1  92.2  92.5  99.2  96.1
Total Investment
116.2 119.9 120.4 124.6 135.1 140.3 145.4 146.5


                     2012                      2013
 Q1  Q2  Q3  Q4  Q1  Q2  Q3  Q4  Q1  Q2   Q3   Q4
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
Total Investment
53.6  62.0 65.5 70.2 71.2 76.9 81.8 83.3 93.0 99.8 100.5 105.3

Source: Indonesia Investment Coordinating Board (BKPM)

The largest foreign investor in Indonesia remains Singapore (investing USD $2.9 billion in Q1-2016), followed by Japan (USD $1.6 billion), Hong Kong (USD $500 million), China (USD $500 million), and the Netherlands (USD $300 million). China recorded a spectacular 400 percent (y/y) growth pace in terms of FDI in Indonesia in the first quarter on the back of several smelter projects (for example the Well Harvest Mining and Morowali projects) and infrastructure projects (such as the Jakarta-Bandung fast train project). Moreover, it is well-known that many Chinese companies invest in Indonesia through their Singapore-based subsidiaries and therefore FDI from China is actually larger than the figures would suggest.

Regarding domestic direct investment, BKPM reported a 18.6 percent (y/y) growth to IDR 50.4 trillion (USD $3.6 billion using the rupiah rate set in the 2016 State Budget). As such, total investment into Indonesia (foreign direct investment plus domestic direct investment) rose 24.6 percent (y/y) to IDR 146.5 trillion in Q1-2016, roughly 25 percent of BKPM's full-year target. In full-year 2016 BKPM targets to see IDR 595 trillion in total direct investment in Indonesia, up approx. 9 percent from investment realization of IDR 545.4 trillion in 2015.

The FDI data released by BKPM today (25/04) are excluding the oil & gas and banking sectors.

Economic Stimulus Packages of the Indonesian Government:

Package Unveiled Main Points
1st 9 September
• Boost industrial competitiveness through deregulation
• Curtail red tape
• Enhance law enforcement & business certainty
2nd 30 September
• Interest rate tax cuts for exporters
• Speed up investment licensing for investment in industrial estates
• Relaxation import taxes on capital goods in industrial estates & aviation
3rd 7 October
• Cut energy tariffs for labor-intensive industries
4th 15 October
• Fixed formula to determine increases in labor wages
• Soft micro loans for >30 small & medium, export-oriented, labor-intensive businesses
5th 22 October
• Tax incentive for asset revaluation
• Scrap double taxation on real estate investment trusts
• Deregulation in Islamic banking
6th 5 November
• Tax incentives for investment in special economic zones
7th 4 December
• Waive income tax for workers in the nation's labor-intensive industries
• Free leasehold certificates for street vendors operating in 34 state-owned designated areas
8th 21 December
• Scrap income tax for 21 categories of airplane spare parts
• Incentives for the development of oil refineries by the private sector
• One-map policy to harmonize the utilization of land
9th 27 January
• Single billing system for port services conducted by SOEs
• Integrate National Single Window system with 'inaportnet' system
• Mandatory use of Indonesian rupiah for payments related to transportation activities
• Remove price difference between private commercial and state postal services
10th 11 February
• Removing foreign ownership cap on 35 businesses
• Protecting small & medium enterprises as well as cooperatives
11th 29 March
• Lower tax rate on property acquired by local real estate investment trusts
• Harmonization of customs checks at ports (to curtail dwell time)
• Government subsidizes loans for export-oriented small & medium enterprises
• Roadmap for the pharmaceutical industry