Indonesia FDI dips slightly in 2016 on lower inflows in mining sector

Indonesia total foreign direct investment (FDI) came in at 28.9 billion U.S. dollar (USD) in 2016, tad lower than the USD 29.3 billion recorded a year earlier, reported the Investment Coordinating Board of Indonesia (BKPM)

Also, the bulk of the drop in FDI is due to the mining sector. While mining has consistently attracted the greatest amount of FDI in recent years, the top destination for FDI is now machinery and electronics, reported DBS in its research note.

On the other hand, other sectors have attracted more investors compared to the mining industry. Total FDI into manufacturing came in a record-high USD16 billion last year, which can only be a positive given the need for the economy to diversify away from commodities, they added.

The DBS Bank in its research note concluded that the reaching an annual FDI of USD 40-50 billion still seems to be some distance away but the increased interest in manufacturing is certainly encouraging. It is important that the government remains committed to further improve the ease of doing business in the economy. A lot has been addressed in the string of reform packages announced since late-2015 and investors will be keen to watch development on those fronts.