Indonesia continues to be a key destination for foreign direct investment (FDI) in Southeast Asia, with a record-breaking year in 2023. The country surpassed its investment target, achieving a total of IDR 1,418.9 trillion (approximately USD 94 billion), a 17.5% increase compared to 2022. Of this, foreign investment accounted for IDR 744.0 trillion, representing 52.4% of the total.
“The realization of foreign investment grew by 13.7% year-on-year,” said Bahlil Lahadalia, Indonesia’s Minister of Investment and Head of the Investment Coordinating Board (BKPM), during the 2023 investment report presentation in Jakarta (24/1/2024) as reported on the website of the Ministry of Administrative Reform and Bureaucratic Reform – Republic of Indonesia.
The robust growth in FDI reflects Indonesia’s appeal across various sectors, driven by its diverse resources, strategic location, and government incentives. The following describes the various sectors targeted for foreign investment in Indonesia.
Also read: Indonesia’s Positive Investment List: Opportunities for Investors
Primary Sector: Rich in Natural Resources
The primary sector, encompassing agriculture, forestry, fisheries, and mining, received significant attention from foreign investors, contributing a total of USD 6.78 billion in 2023. This sector’s allure lies in Indonesia’s vast natural resources, which continue to attract investments despite global economic uncertainties.
- Mining: Dominating the primary sector, mining attracted USD 4.72 billion, driven by Indonesia’s wealth in minerals, coal, and other extractive resources. The demand for these resources, especially in the global energy and manufacturing industries, positions Indonesia as a critical player in this sector.
- Agriculture, Plantations, and Livestock: Foreign investments in this subsector reached USD 1.95 billion, reflecting the global demand for agricultural products and Indonesia’s status as a major producer of palm oil, rubber, and other cash crops.
- Forestry and Fisheries: These sectors saw relatively modest investment, with USD 95.99 million and USD 25.73 million respectively, indicating niche opportunities for sustainable resource management and aquaculture.
Secondary Sector: The Backbone of Industrial Growth
The secondary sector, which includes manufacturing and industrial activities, emerged as the largest recipient of foreign investments in 2023, totaling USD 28.69 billion. This sector is vital for Indonesia’s economic development, offering vast opportunities for foreign investors.
- Basic Metal, Metal Goods, Excluding Machinery and Equipment: This industry led the secondary sector with an impressive USD 11.79 billion in foreign investments. Indonesia’s growing metal processing and refining industries, especially in nickel and aluminum, are key contributors.
- Chemical and Pharmaceutical Industry: Attracting USD 4.81 billion, this subsector highlights Indonesia’s expanding role in the global pharmaceutical and chemical markets, driven by increasing domestic demand and export potential.
- Food and Beverage Industry: With investments of USD 2.26 billion, this sector underscores the rising interest in Indonesia’s large consumer market and its capacity to be a food processing hub in the region.
- Textiles, Leather Goods, and Footwear: These industries collectively received over USD 1.24 billion, showcasing Indonesia’s competitive edge in labor-intensive manufacturing, particularly in the apparel and footwear sectors.
Also read: Top Foreign Investors in Indonesia (by Country and Continent)
Tertiary Sector: Infrastructure and Services on the Rise
The tertiary sector, focusing on services, infrastructure, and real estate, attracted USD 14.80 billion in foreign investments in 2023. This sector’s growth is pivotal for supporting Indonesia’s broader economic ambitions.
- Transportation, Warehousing, and Telecommunications: With investments amounting to USD 5.62 billion, this subsector is crucial for Indonesia’s infrastructure development, reflecting the need for better connectivity and digital transformation across the archipelago.
- Electricity, Gas, and Water: Attracting USD 2.74 billion, investments in this subsector are vital for meeting the growing energy demands and improving public utilities, essential for sustainable urbanization.
- Real Estate, Industrial Estates, and Office Buildings: Foreign investors contributed USD 2.57 billion to this subsector, driven by the demand for commercial real estate and the development of industrial parks to support manufacturing activities.
- Trade and Repair Services: With USD 943.8 million in investments, this subsector reflects the growing consumer market and the need for expanded retail and service networks.
Also read: Indonesia Negative Investment List (DNI): Latest Update
Indonesia’s diverse economy offers a wide range of opportunities for foreign investors across various sectors. In 2023, the country’s industrial sector, particularly in basic metals, chemicals, and food processing, stood out as the most attractive for foreign investment. The ongoing development in infrastructure and services further solidifies Indonesia’s position as a top investment destination in the region.
With a favorable investment climate and strategic government initiatives, Indonesia is well-positioned to sustain its growth trajectory, offering lucrative opportunities for foreign investors seeking to tap into one of Southeast Asia’s largest and most dynamic markets.
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data source: Ministry of Investment Indonesia/BKPM
