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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: THE ANT who wrote (113798)

10/16/2015 4:15:19 AM

From: elmatador

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Indonesia bucks emerging market trend with rising FDI

While most emerging markets are suffering declines in foreign direct investment this year, Indonesia, Southeast Asia’s largest economy, is among the few posting growth figures for greenfield investment.

sign of tide changing,....

Midyear figures from fDi Markets, an FT data service, reveal that capital expenditure on greenfield projects by foreign companies increased 62 per cent during the first six months of 2015 compared with the same period last year, to nearly $14bn.

It is Japanese companies that are most keen on Indonesia. Japan is the top source country for investment into the country, accounting for an estimated $18bn on 218 projects over the five-year period between 2010 and 2014.

China, by comparison, invested $11bn on 36 projects. Japanese motor giant Toyota is the largest investor in Indonesia, spending nearly $2bn on 16 projects over the five-year period, mostly on manufacturing facilities.

Manufacturing is by far the leading FDI activity, accounting for 40 per cent of all greenfield investments into the country. In 2014, Indonesia ranked as the number three manufacturing destination in Asia-Pacific based on capital investment, after China and Vietnam.

To date in 2015, it is retaining its top-three position. Costs are a major driver of manufacturing investment in Indonesia. According to fDi Benchmark, a sister data service to fDi Markets, operating costs of an automotive OEM manufacturing plant are cheaper than Malaysia, Vietnam and Thailand, at $3.29m per annum.

But despite its recent gains, Indonesia still has its work cut out.

The FDI landscape in Asia is highly competitive, and closer to home Indonesia is locked in close competition with Malaysia, Thailand and a fast-emerging Vietnam, which is proving to be one of the world’s best performing FDI locations recently.

In 2014 Indonesia attracted $17bn in greenfield FDI, accounting for 7 per cent of investment into the Asia-Pacific region, roughly the same percentage as Malaysia (Thailand captured 3 per cent, and Vietnam, 9 per cent.) By number of projects, Indonesia received 155 last year, just ahead of Thailand’s 149, yet fewer than Malaysia’s 187 and far fewer than Vietnam’s 241.

Indonesia’s 2015 FDI upswing comes at a time when the government is in search of positives to highlight.

Investments in manufacturing in Asia-Pacific, January to August 2015*Destination countryCapex ($m)**

India	20,434
China	14,289
Indonesia	10,450
Vietnam	6,725
Uzbekistan	3,440
Japan	2,809
Thailand	2,541
Malaysia	1,681
Singapore	1,585
Philippines	1,474
Source: fDi Markets latest available data *includes estimates

President Joko Widodo shuffled his cabinet in August — a year after taking office — in an effort to boost confidence in the government’s management of the economy amid worries over a slowdown. Gross domestic product growth was 5 per cent in 2014 compared with 6.2 per cent in 2010, according to World Bank figures.

The central bank of Indonesia has cut its 2016 forecast for the second time this year and now expects year-on-year growth of 5.2 per cent to 5.6 per cent.

Low commodity prices and weak export figures are among the factors being blamed. Although official jobless figures show only a small increase in the unemployment rate, Indonesian companies in labour-intensive sectors are shedding jobs.

With local companies losing confidence and apparently bracing for a bigger slowdown, the question is whether foreign investors can pick up the slack, or whether they too will turn more bearish.