Although Indonesia’s export receipts hit a five-year high in 2018, imports surged as the country moved to deliver a massive infrastructure development programme, bringing the trade deficit to an all-time high after three years of surplus. The country remains dependent on raw commodities for much of its export revenues; global commodity price volatility has weighed on the trade balance in recent years, while lower demand for Indonesian exports has further dampened the outlook.
Foreign direct investment (FDI) inflows also slumped in 2018 after recording five years of consecutive growth, with global emerging market jitters and Indonesia’s upcoming presidential elections affecting investor sentiment. Recent reforms to prevent capital outflow from China have further weighed on FDI growth, highlighting the importance of fostering stronger trade and investment ties with smaller partners, as well as leveraging economic strength in major multilateral free-trade agreement negotiations.
This chapter also contains interviews with Enggartiasto Lukita, Minister of Trade, and Thomas Lembong, Chairman, Indonesia Investment Coordinating Board.