Foreign direct investment (FDI) inflows posted a sixth straight quarterly record in Indonesia, although the growth rate is slowing as a slump in commodity prices hits the mining sector.
Indonesia's investment board has reported that foreign investment reached 66.7trn rupiah ($6.5bn) in the April-June period, signalling a new record for the sixth quarter in a row and underlining the allure to investors of Indonesia's natural resources and middle class of tens of millions of people. The rate of growth was 18.9% year-on-year, suggesting the pace of capital inflows may be slowing.
South-east Asia's largest economy has recorded growth of more than 6% in four of the past five years, but earlier this month Bank Indonesia cut its 2013 growth forecast to 5.8%-6.2%, from 6.2%-6.6%. Investment board Chairman Chatib Basri told the Wall Street Journal that a cloudy outlook for mining, along with moves from the Federal Reserve in the US to wind down quantitative easing and monetary tightening by Bank Indonesia are likely to slow investment activity, although domestic investment rose 59.1% year-on-year and FDI still remains resolutely stable.
Recent estimates suggest Indonesia could lure $30bn-$40bn annually within the next five years if the government can improve dilapidated public infrastructure and boost productivity. HSBC Economist Su Sian Lim said Indonesia remains an attractive destination for direct investment.
"Clearly the slowdown in global growth at the moment is a headwind, but only moderately so," she said.
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