Other BriefingsIndonesia’s Record Investment Inflows: Key Highlights from H1 2024
According to Indonesia’s Ministry of Investment, the country secured some 829 trillion rupiah (US$53 billion) in combined foreign and domestic investments in the first half of 2024 (January-June). This represents a 22.3 percent increase from the same period in 2023.
Of the 829 trillion rupiah in realized investment, 50.8 percent came from foreign investments with the remaining from domestic investors. Further, the realized investment is approximately 50.3 percent of Indonesia’s 2024 investment target of 1,650 trillion rupiah (US$103 billion).
As with 2023, Indonesia has seen the most investments in its downstream metal industry.
Indonesia’s top FDI sources for January-June 2024
The top 10 sources of foreign investment in Indonesia for this period are as follows:
- Singapore – US$8.8 billion;
- China – US$3.9 billion;
- Hong Kong – US$3.8 billion;
- United States – US$2.4 billion.
- Japan – US$1.79 billion;
- South Korea – US$1.76 billion;
- Malaysia – US$1.73 billion;
- Netherlands – US$816 million;
- British Virgin Islands – US$395 million; and
- United Kingdom – US$306 million.
Notable sectors that attracted major investments in Indonesia
The basic metals industry
Indonesia’s basic metals industry saw 122 trillion rupiah (US$7.8 billion) in domestic and foreign investments in the first half of 2024.
The country aims to capitalize on its vast mineral wealth to advance its downstream mineral industry, with a strong focus on nickel. As the holder of the world’s largest nickel reserves, estimated at 22 million tons, Indonesia is strategically leveraging these resources, along with other minerals, to attract FDI for the development of local smelters.
As such, Indonesia is developing an integrated electric vehicle (EV) supply chain and aims to become one of the world’s top three producers of EV batteries by 2027. Further, Indonesia aims to produce EV batteries with a total capacity of 140GWh per year by 2030, which will account for between 4 to 9 percent of global demand.
Transportation and telecommunications
In the first half of 2024, Indonesia recorded 89.2 trillion rupiah (US$5.7 billion) in domestic and foreign investments in the transportation and telecommunications sectors.
Indonesia trails behind only China and India in the number of cellular phone subscriptions with 355 million subscribers. Moreover, In late 2019, the government announced the completion of the Palapa Ring project – a priority infrastructure project that aimed to provide access to 4G internet services to more than 500 regencies across the country. As such, the country now boasts an estimated 258 million 4G subscribers.
Indonesia’s transportation sector is a vital component of the nation’s economy, supporting its expansive archipelago of over 17,000 islands.
For example, in the road transport sector, the government has prioritized the expansion of toll road networks. The Trans-Sumatra Toll Road, one of the most significant projects, is part of a broader initiative to boost connectivity across the island of Sumatra. The project aims to construct over 2,000 kilometers of toll.
Indonesia’s rail sector has also seen major investments, particularly in urban rail networks and high-speed rail projects. Indonesia successfully launched Southeast Asia’s first high-speed rail on October 2, 2023. The 142km track stretches from Jakarta to Bandung, the provincial capital of West Java province and the third largest city in Indonesia, cutting down travel time from two to three hours by conventional railway to just 40 minutes using the bullet train.
Mining
Indonesia is actively seeking to add more value to its mining sector by focusing on downstream processing and refining of its abundant mineral resources. Foreign and domestic investments in the first half of 2024 reached 87.9 trillion rupiah (US$5.6 billion).
In addition to nickel, Indonesia’s strategy to add more value to its mining sector also extends to its coal and gold industries, both of which play significant roles in the country’s economy.
Indonesia is one of the world’s largest producers and exporters of coal, particularly thermal coal used in power generation. In 2023, the country exported 508 million tons of coal. To add value to its coal industry, Indonesia is focusing on developing coal downstream projects, including coal gasification, coal liquefaction, and coal-to-dimethyl ether (DME) production.
Indonesia is also a significant producer of gold, with major mining operations spread across several islands, including Sumatra, Kalimantan, and Papua. The country produces some four percent of global gold production, half of which originates in the Grasberg mine in Papua province. The mine is believed to contain the world’s largest gold reserves (approx. 67 million ounces) and is operated by local company PT Freeport Indonesia and American mining giant Freeport-McMoRan.
Indonesia’s attractiveness as an investment destination
The significant rise in investment inflows underscores Indonesia’s growing attractiveness as an investment destination. The sharp increase from the previous year indicates strong investor confidence in the country’s economic stability and growth prospects.
However, challenges remain, such as ensuring the rapid development is sustainable. The government’s continued efforts to streamline regulations and provide incentives will maintain this positive investment trajectory.
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