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View all search resultsTariff jitters, rising rivals threaten RI's foreign investment charm
Analysts suggested that Indonesia scale up production to attract more manufacturers seeking new destinations, which could spur corporate investment and growth in the country.
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High-rise buildings are seen on March 14, 2021, in the Sudirman central business district of Jakarta. (AFP/Adek Berry)
Indonesia has seen foreign investors’ appetite weaken despite surging domestic investment that took up the slack.
Analysts cited global uncertainty, especially jitters over United States import tariffs, as a factor keeping foreign capital out of emerging markets. Adding to the challenge, rival Southeast Asian nations have been upping their game, chipping away at Indonesia’s share of the pie.
Foreign direct investment (FDI) in Indonesia fell 6.95 percent year-on-year (yoy) to Rp 202.2 trillion (US$12.4 billion), accounting for only 42.3 percent of total investment in the second quarter of this year. Meanwhile, domestic investment made up the remaining 57.7 percent at Rp 275.5 trillion, according to the latest report from the Investment Ministry.
Donny Donosepoetro OBE, CEO of Standard Chartered Indonesia told The Jakarta Post on Monday that foreign sentiment globally had been generally cautious so far this year, shaped by heightened geopolitical tensions in various regions and uncertainties surrounding US trade tariff policy.
“These uncertainties have the potential to alter the global trade landscape and weigh on global growth through higher prices from tariff implementation,” he said.
On the domestic front, he added, budget refocusing earlier this year and a relatively modest growth outlook have also contributed to more cautious consumer spending and investment decisions.
Chief Indonesia and India Economist at HSBC Global Research Pranjul Bhandar also said that many countries had taken a hit amid global uncertainties, particularly with the US tariffs that had been imposed, which prompted companies to prefer saving over investing.
