Highest Foreign Investment in the last four years

According to the Indonesian Investment Authority BKPM, Indonesia has attracted US$31.1 billion in foreign investment (FDI) in 2021. This is an increase of $2.4 billion compared to the previous year and the highest value since the record year 2017 ($32.1 billion). 

The development is surprising because in 2021 there were sometimes severe restrictions on public life and it was hardly possible for foreign business people without a temporary or permanent residence permit to enter the country throughout the year. BKPM cites the liberalization of investment law as one reason for the increased inflows. 

The most important country of origin for FDI is traditionally Singapore, through which not only many Chinese but also Western companies direct their funds to the archipelago. More than half of all inflows come from the city-state, Hong Kong and China. The US became the third largest foreign investor in 2021, contributing $2.5 billion to the year’s total.  

Inflows worth $183 million came from Germany in 2021 (spread over 515 projects). Altogether, this corresponds to an increase of $40 million compared to 2020. Traditionally, Germany has played the role of technology supplier rather than investor. 

More investment in mining 

The broad sectors defined by BKPM allow a rough classification of foreign investments. The category of "base metal processing without machinery and equipment" is the most important field. Next comes mining, where foreign inflows have almost doubled compared to 2020. The reason for this could be coal mining, which came up with record exports in 2021, and booming nickel mining, especially in the island of Sulawesi. 

Additionally, there were significantly fewer investments than in the previous year in the areas of electricity, gas and water supply. On the other hand, food processing increased significantly compared to 2020. It is by far the largest industrial sector in the archipelago. 

About half of the direct investments from Germany were distributed among the broadly defined mechanical engineering/electronics/medical technology/measuring and control technology sector (29 projects) and one quarter in mining (10 projects).  

Hopes for higher FDI 

According to BKPM’s statistics, the trend is towards more domestic investment. While these accounted for little more than a third of all funds up to 2016, they caught up in the following years and were even slightly higher than FDI for the first time in 2020. According to the BKPM, the total investments of $62.7 billion in 2021 are to be increased by thirty percent in 2022. 

The investment authority expects a further strengthening of foreign investments in the coming years due to the now improved investment conditions. The driver should be the global increase in demand for raw materials, especially their processing in the country. 

According to media reports, BKPM is also announcing special teams that will pick up foreign investors in their own country. In Europe, BKPM has one branch office in London.