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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One piece of evidence of international confidence in the Indonesian economy is the steady upgrades in the country's credit ratings by international financial services companies such as Standard & Poor's, Fitch Ratings and Moody's. In late 2011, Fitch Ratings was the first to reinstate Indonesia's investment grade status after a 14-year hiatus. In January 2012, Moody’s followed suit citing the country’s resilient economy. S&P may follow soon, depending on the fuel price hike issue.

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Foreign investment in Indonesia has maintained its steady pace in the first quarter of 2013. Ahead of next year's presidential and legislative elections, which trigger uncertainties about the future course of the country, foreigners have bought more Indonesian stocks in Q1-2013 than in the four quarters of 2012 combined. Moreover, foreign direct investments (FDIs) have increased by 27 percent (YoY) in Q1-2013 and show an interesting shift towards Indonesia's manufacturing sector.

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In Quarter I 2013 (January-March), total investment in Indonesia increased 30.6 percent to IDR 93.0 trillion (US $9.58 billion) compared to the same period in 2012 according to data from the Indonesia Investment Coordinating Board (Badan Koordinasi Penanaman Modal, abbreviated BKPM), a government institution. Of this total amount, about seventy percent is accounted for by foreign direct investment, while the remaining thirty percent constitutes domestic direct investment.

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This column is the first in a series of columns about investing in Indonesia, in particular about investing in its capital markets. These columns are written by David Sutyanto, research analyst at First Asia Capital, and - as this column is the starting point - he will provide a short and broad outline of the Indonesian capital markets for now. Later, his columns will contain topics that delve more deeply into the capital markets, such as listed companies, and much more.

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The Investment Coordinating Board (BKPM) of Indonesia announced today that investment realization figures for domestic and foreign direct investment in the fourth quarter of 2012 increased by 18.7 percent to IDR 83.3 trillion (US $9 billion) compared to the same period in 2011 (when it was IDR 70.2 trillion). For the whole year of 2012, the cumulative of investment realization is IDR 313.2 trillion, implying that it had surpassed the government target of IDR 283.5 trillion.

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