Although the International Monetary Fund (IMF) retains its positive outlook regarding Asia's economic growth for the foreseeable future, the institution warns that the enormous influx of foreign capital in recent years can result in a new bubble due to excessive growth in lending and property prices. Despite these concerns, the IMF expects Asia to grow 5.75 percent in 2013 and calls Asia the leader of global economic recovery, followed by the US and, lastly, Europe.

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In the first quarter of 2013, Indonesia's manufacturing sector has received increasingly more investments compared to the same period last year. Investors directed IDR 53.26 trillion (USD $5.5 billion) towards Indonesia's manufacturing sector out a total of IDR 93 trillion (USD $9.6 billion) investment in Q1-2013. Compared to Q1-2012, investment in the manufacturing sector grew 84 percent. It is a positive development as it reduces Indonesia's dependence on natural resources, produces added-value products, and provides employment opportunities.

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Indonesia has been named one of the world's least attractive places regarding foreign investment in the mining sector according to a survey conducted by Canadian think-tank the Fraser Institute. Major concerns include legal uncertainty and red tape (bureacracy). Moreover, the country has been showing a worsening trend in recent years as its rank declined from 72th in 2009 to 97th in 2013.

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A foreign trade representative office in Indonesia can be set up by overseas companies quickly and with relative ease. In general, a foreign trade representative office is established with the purpose to take care of the interests of the parent company abroad and/or for preparation of the establishment and development of foreign investment activities in Indonesia. Due to their purpose the scope of activities is limited to representation of the overseas company and is therefore not allowed to directly be engaged in sales and related activities.

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The result of Indonesia’s presidential election (scheduled for 9 July 2014), which has become a tight race between Prabowo Subianto and Joko Widodo (Jokowi), will for sure have a large impact on foreign investors’ confidence in Indonesian politics and the economy. A few weeks ago, a survey of Deutsche Bank showed that a majority of respondents (consisting of foreign investors) intend to sell their Indonesian assets if controversial candidate Prabowo Subianto will be elected. What are foreigners’ perceptions of a Subianto win?

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Sunday evening (15/06), the second debate between Indonesia’s two presidential candidates - Prabowo Subianto and Joko ‘Jokowi’ Widodo - was held. This debate was broadcast live on various Indonesian television stations and - once again - managed to become a trending topic on social media. The debate, the theme of which was ‘development of the economy and social welfare‘, was characterized by a nationalistic and protectionist tone. This tone had already been set by Subianto in the past weeks but now Jokowi also stressed protectionism.

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Indonesia's gross domestic product (GDP) growth is expected to move sideways in the first quarter of 2014. Finance Minister Chatib Basri forecasts a growth rate of between 5.7 and 5.8 percent, similar to the growth pace that was recorded in the fourth quarter of 2013 (5.78 percent). Based on data from Statistics Indonesia (BPS), economic growth in Indonesia has slowed since the second quarter of 2013. In Q2-2013, Indonesia's GDP expanded by 5.89 percent, thereby ending a ten-quarter streak of +6 percentage growth.

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In 2013, Indonesia experienced a rough year in terms of stock trading. The world was shocked by Ben Bernanke’s speech in late May 2013 in which he hinted at an end to the Federal Reserve’s large monthly USD $85 billion bond-buying program known as quantitative easing. Through this program, cheap US dollars found their way to lucrative yet riskier assets in emerging economies, including Indonesia. But when the end of the program was in sight, the market reacted by pulling billions of US dollars from emerging market bonds and equities.

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A survey released by The British Chamber of Commerce Indonesia (BritCham) showed that United Kingdom (UK) investors’ confidence on doing business in Indonesia in 2013 and 2014 dropped but is still positive overall. One hundred corporate and other members of BritCham, 95% of whom hold Senior Management posts, participated in this survey. The survey showed that 60% of the total respondents remained confident about their business in Indonesia, down from 83% in 2012, while the Ease of Doing Business score fell by 15% from 65% to 50%.

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Liberalization of trade and investment among the Asia-Pacific Economic Cooperation (APEC) members should be expanded and governments should refrain from using any protectionist measures. Meanwhile, the private sector plays an important role in the economic expansion of the Asia-Pacific and governments should create a conducive investment climate for this sector. This was the main message conveyed in the speech of John Kerry, US minister of foreign affairs who replaced Barack Obama at the APEC Leader Summit.

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Softer than expected economic activity in the People’s Republic of China (PRC) and India and jitters over the United States (US) quantitative easing (QE) program will weigh on Asia and the Pacific’s growth prospects in the near term, says a new Asian Development Bank (ADB) report. “Asia and the Pacific's 2013 growth will come in below earlier projections due to more moderate activity in the region’s two largest economies and effects of QE nervousness,” said ADB Chief Economist Changyong Rhee.

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Growth rates in Indonesia in 2013 and 2014 will fall below earlier projections, highlighting the need to continue improving the country’s competitiveness in manufactured exports, says the Asian Development Bank (ADB) in an update of its flagship annual economic publication, Asian Development Outlook 2013. ADB revised down its 2013 gross domestic product (GDP) growth forecast for Indonesia to 5.7% from 6.4% seen in April. For 2014, growth will also be adjusted to 6.0% from the previous estimate of 6.6%.

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After China and India, Indonesia is currently the third most important investment destination for Japanese investments in the manufacturing sector. In 2011, Indonesia - Southeast Asia's largest economy - was still ranked number five on that list. However, in recent years the country managed to surpass Thailand and Vietnam. This fact indicates the important link between Indonesia and Japan. The chief executive officer of the Japan Bank for International Cooperation (JBIC), Hiroshi Watanabe, confirmed these findings.

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