JAKARTA (TheInsiderStories) - Foreign direct investment from South Korea and Japan in Indonesia shows an upward trend, indicating greater increasing confidence of investors from those two countries to investment in Indonesia. The Head of National Investment Coordinating Board (BKPM) expects the investment will continue to increase in the coming years in line with the concerted efforts by the government led by BKPM to improve investment climate.
Some Japanese investors appeared to be disappointed with the Indonesian government decision to award Chinese company to build the Jakarta-Bandung high speed train, however, the government believes the disappointment would not affect the appetite of Japanese investors to invest in Indonesia.
Last week, the Head of BKPM Franky Sibarani visited Japan to promote investment opportunities in Indonesia as well as the efforts undertaken by the government and BKPM to improve investment procedures, including the recently launched three-hour investment permit. The three-hour investment permit is the latest reform undertaken by BKPM to smoothen investment procedures.
Investment from the two countries showed an upward trend. Based on the BKPM data, in the period of Oct. 22, 2014 to Dec. 4, 2015, South Korean investment commitment in Indonesia is recorded at US$ 16 billion (or Rp216 trillion at an exchange rate of Rp 13,500).
The Head of BKPM said that South Korea is one of the largest foreign investors in Indonesia, along with Japan and China.
According to Franky, investors from South Korea tend to be aggressive and make bold investment decisions. “They realize that in Indonesia, they have to compete with other investors,” he said.
Franky added that of the investment commitment, approximately US$4 billion is classified as serious interest. “The characteristics of this seriousness is determined by the frequency of visits by investors to Indonesia, as well as the result of good communication with BKPM representative office in Seoul as well as by a team of Marketing Officer in Jakarta,” he said.
Of the investment commitment of US$4 billion, as much as US$2.8 billion investment is directed to labor-intensive industry, US$538 million to infrastructure sector and import substitution industry amounting to US$452 million.
He said of this US$4 billion investment commitment, the investment that has been realized reached US$616 million, comprises of labor-intensive industries amounting to US$257 million, US$158 million in infrastructure, and US$141 million to agriculture sector.
Franky assures that BKPM will continue to coordinate with all stakeholders to ensure that the investment commitments are realized, including investments from South Korean investors.
Based on BKPM data, the realized investments for the period of January to September, 2015, South Korea ranked fourth with an investment of US$1.0 billion consisting of 1,529 projects. The South Korean investment was below Singapore, which topped US$3.55 billion with 1,999 projects; Malaysia with US$2.9 billion with 600 projects and Japan ranks third with actual investment value of US $ 2.5 billion with 1,318 projects, while the Netherlands was just below South Korea, with investment value of US$908 million comprising of 301 projects.
Japanese investment
Separately, BKPM expects investment from Japan in 2016 to reach US$13 billion (around Rp 175.5 trillion at an exchange rate of Rp 13,500). The value of the investment commitment is demonstrated through a number of in-principle licenses acquired by Japanese companies to invest in Indonesia.
Franky Sibarani made the statement when meeting with Indonesian Ambassador to Japan Yusron Ihza Mahendra, deputy ambassador Ben Perkasa Drajat and Indonesian diplomats in Tokyo on Dec. 11. On the occasion, the Head of BKPM revealed steps that have been undertaken by the agency to improve investment climate and investment opportunities as well as investment opportunities that are the priority of the government.
“The characteristics of a typical Japanese investors require the cooperation of all parties, both the central and local governments. We hope BKPM and the Indonesian Embassy in Tokyo can continue the efforts to attract as many Japanese investors to enter Indonesia,” the Head of BKPM Franky Sibarani said.
He noted that investment from Japan ranked as the second largest after Singapore, with a total investment of US$14.6 billion and accounted for 10.5 percent of the total value of investments, in the period of 2010 to the third quarter of 2015.
Investment from Japan mainly went to transportation industry; industrial metals, machinery and electronics; chemical and pharmaceutical industries; residential, industrial and office areas; as well as the food industry. In terms of investment location, 95 percent of investment are still focused on the island of Java, and the rest scattered in other areas in Indonesia.
The Head of BKPM visited Japan last week to promote investment opportunities in Indonesia to the 183 Japanese investors, including the three-hour investment service. Franky delivered a speech at a seminar on ‘Investing in Indonesia’s Industrial Sectors: Opportunities for Japanese SMEs.’
Also present at the event was Japanese Chamber of Commerce Executive Director Takashi Kugai, representatives of the Ministry of Industry Gati Wibawaningsih, Deputy Director JETRO Hideki Fujie, representatives of SMBC Hiramaya Masaya and Director of IIPC Tokyo Saribua Siahaan.
Besides 183 presentations to Japanese investors, the Head of BKPM also conducted one-on-one meetings with a number of top executives who are interested to invest in Indonesia.
Based on the BKPM data, in the period of Oct. 22, 2014 until Dec. 4, 2015, the realized Japanese investment in Indonesia reached US$11.4 billion (Rp 153.9 trillion), while investment commitment topped US$ 5.7 billion (Rp 76.9 trillion). (*)