The UN Conference on Trade and Development (UNCTAD) issued the 2016 Global Investment Trends Monitor report last Thursday (Oct 6), listing top prospective host countries for foreign direct investment (FDI) from 2016 to 2018. Indonesia is ranked the ninth most promising market, rising up from the 14th position in 2014. Malaysia, who ranks 10th and Indonesia are the only two Southeast Asian countries listed in the report’s top 10, which is spear-headed by the USA, followed by China and India.
There is the expectation among a majority of multinational CEOs that the investment flow to Indonesia’s manufacturing and service sectors will grow, the study reports. Danareksa Sekuritas’ analyst Lucky Bayu Purnomo told The Jakarta Post recently, that developed countries like those in Europe have reached a saturation point. Therefore global investors increasingly look at opportunities in developing countries like Indonesia. According to Lucky and Rosan P. Roeslani, chairman at the Indonesian Chamber of Commerce and Industry (Kadin), the consumer goods and infrastructure are the most attractive sectors for future foreign direct investment.
Rosan pointed out that Indonesia’s middle-class population is growing rapidly, leaving the country’s consumer goods sector as the market most likely to benefit from the current situation. A recent survey by Boston Consulting Group (BCG) forecasts that the number of middle-class and affluent consumers - defined as possessing at least IDR 50 million (EUR 350) in household assets - is set to grow from 88 million in 2014 to 141 million people until 2020. Sancoyo Antarikso, corporate secretary at consumer goods manufacturer Unilever Indonesia agrees as the consumption level per capita of almost all categories his company is active in is still relatively low, leaving room for rapid growth in the future.
Both Lucky and Rosan agree also, that the infrastructure sector would also benefit from FDI inflows. It is reportedly one of the Indonesian government’s top priorities to improve the country’s inefficient logistics system as it is seriously hindering economic development. The country’s infrastructure projects will cost IDR 5.5 quadrillion (EUR 385 billion) in total by 2019, data from the National Development Planning Agency (Bappenas) show. Consequently, many companies expect to benefit from the government’s ambitious infrastructure plans. Companies such as publicly listed diversified conglomerate Astra International increasingly allocate capital to finance projects in infrastructure, logistics and property sectors. Astra for example, began to focus on non-automotive businesses due to a stagnant automotive market. At present Astra controls five toll road projects and builds two power plants in Jepara, Central Java, with a total investment of USD 3.5 billion (EUR 3.5 billion).
Daewoo Securitas Indonesia additionally reported in August that investors move their money away from the UK elsewhere including to emerging markets like Indonesia as they sought better returns there. Following the UK’s decision in June to leave the EU, global central banks decided to ease their monetary stance and reduce interest rates further.