Trade & Investment
From The Report: Indonesia 2015
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With full-year realised foreign direct investment (FDI) hitting a new record in 2014, Indonesia’s trade and investment flows have improved considerably over the last 10 years. The capital account deficit was brought back under 3% that year, and at the end of 2014 and in early 2015 the country reported a trade surplus after years in the red. Due to stronger economic growth and new policy initiatives, the uptick could become a sustained trend. However, risks remain. The government and monetary authorities need to keep a grip on policy, making sure they maintain discipline without being too strict. Early indications are that the new administration and the monetary authorities will work effectively towards achieving the right balance through consistent, steady improvements.

This chapter contains interviews with Franky Sibarani, Chairman, Indonesia Investment Coordinating Board; Ngalim Sawega, Chairman and Executive Director, Indonesia Eximbank; and SD Darmono, President Director, Jababeka.

Articles from this Chapter

Overview

FDI keeps climbing as Indonesia’s trade balance records a surplus
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With full-year realised foreign direct investment (FDI) hitting a new record in 2014, Indonesia’s trade and investment flows have improved considerably over the last 10 years. The capital account deficit was brought back under 3% that year, and at the end of 2014 and in early 2015 the country reported a trade surplus after years in the red. Due to stronger economic growth and new policy initiatives, the uptick could become a sustained trend. However, risks remain. The government and monetary authorities…

Analysis

Oil prices impact Indonesia’s trade balance
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Following a few challenging years that saw Indonesia’s trade balance fall into the red for the first time in years, the country’s trade deficit is rapidly shrinking in the wake of a decline in global oil prices. Although it reached nearly $2bn in 2014, the deficit still stood at less than half its 2013 level, while modest surpluses in early 2015 indicate the nation is beginning to benefit from falling oil prices, which are projected to remain depressed in 2015. Although the recent decision to…

Interview

Franky Sibarani, Chairman, Indonesia Investment Coordinating Board (BKPM): Interview
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Interview:Franky Sibarani It is argued that new investments should help position Indonesia as a production base, rather than an expansion market. Will this be a focus for BKPM? FRANKY SIBARANI: BKPM has built a strong relationship with the relevant ministries to formulate policies as far as investment climate issues are concerned, including labour, electricity and dispute settlement, among others. Even on incentive issues, BKPM has been given a more significant role in coordinative decision-making…

Interview

Ngalim Sawega, Chairman and Executive Director, Indonesia Eximbank: Interview
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Interview:Ngalim Sawega How does Eximbank assist Indonesian exports? NGALIM SAWEGA: In 2014 the credit banked by Indonesian exports in the banking industry grew modestly, despite exports decreasing due to weak demand in the global market and the decline of commodity prices. Indonesia Eximbank commits to supporting national exports through continuously implementing financing, guarantees and insurance facilities. Our financing grew by 36% on 2013 to amount to Rp55.2trn ($4.56bn), while export…

Analysis

Indonesia’s trade ties with Japan have expanded in recent years
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Indonesia’s trade ties with Japan have shown tremendous growth in recent years, with Japan now its second-largest source of investment and second-largest trade partner, despite a decline in investment in 2014. Bilateral ties are expected to grow on the back of new opportunities in manufacturing, defence and energy, although a persistent trade imbalance between the two has led Indonesia to begin reconfiguring its relations with Japan in a bid to reduce its trade deficit. While renegotiating the…

Interview

SD Darmono, President-Director, Jababeka: Interview
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Interview:SD Darmono How can private, local firms help address investment obstacles and boost foreign direct investment (FDI)? SD DARMONO: Before entering any country, foreign investors must learn about its local regulations, cultures, habits, markets and politics. In Indonesia’s case, they can seek the guidance of the Indonesia Investment Coordinating Board. The whole investment ordeal, however, can take time and may be expensive. Companies must often go through a risky process of trial…

Analysis

Indonesia’s government focuses on FDI and reducing the current account and trade deficits
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A key goal of Indonesia’s new president, Joko Widodo, is to boost GDP growth to 7% during his tenure, after it fell to a five-year low of 5.02% in 2014. He will face several challenges in this endeavour. Oil and gas revenues have declined on the back of a drop in prices, while falling global prices for other commodities have translated into weaker demand for Indonesian exports. At the same time, Indonesia must work to reduce its trade and current account deficits, while building on recent successes…

Analysis

Foreign banking regulations in Indonesia seek to protect local institutions
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In an effort to protect its domestic banking industry from foreign competition, the Indonesian government has imposed restrictions on foreign banks operating in the country, introducing ownership restrictions in 2012, and drafting new regulations that would oblige foreign banks to become locally incorporated entities. The nation’s banking sector has been criticised as too liberal compared to its regional neighbours, and restrictions on Indonesian banks in markets such as Malaysia and Singapore…

Analysis

Competition between China and Japan should benefit Indonesia
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The rising attractiveness of Indonesia as a regional destination for foreign direct investment (FDI) has been highlighted by its growing trade relationship with China, with leaders from both nations announcing over $60bn in potential new investments and financing in early 2015. Indonesia’s planned wave of national infrastructure projects is expected to gain from competition between China and Japan as both vie to establish stronger economic ties with the country, although the Indonesian government…