By Stefanno Sulaiman
JAKARTA- Foreign direct investment into Indonesia rose 16.6 percent on a yearly basis in the second quarter to 217.3 trillion rupiah ($13.35 billion), bolstered by investment in the metal refining industry, the investment ministry said on Monday.
That rate was slightly faster than the annual FDI growth of 15.5 percent in the first three months of 2024. The data excludes investment in the financial and oil and gas sectors.
In April-June, the Southeast Asian country reported foreign investment worth $4.4 billion in 1,130 projects in the base metals industry, the biggest beneficiary of FDI in the period.
Indonesia has seen rising foreign investor interest in its mining and metal refining industry since it banned exports of nickel ore in 2020 and other raw minerals in 2023.
Among the most notable investment in the second quarter was the completion of Freeport Indonesia’s copper smelter in East Java, Investment Minister Bahlil Lahadalia said.
More launches of FDI projects in metal refining are expected in the second half of 2024, he said.
“In the car battery ecosystem, there will be a launch in cathode (factory) by LG,” he said, referring to an investment by South Korea’s LG Energy Solution in Indonesia’s Batang industrial estate in Central Java.
Indonesian President Joko Widodo last week said LG’s cathode plant is expected to start producing in September.
Bahlil said facilities at China’s Zhejiang Huayou Cobalt’s investment in the Weda Bay nickel industrial park in north Maluku will make battery precursor to supply Tesla from the start of next year.
The minister also hoped the launch of the second phase of the Batang estate last week would boost FDI figures going forward. Jakarta has been marketing the industrial estate as a destination for companies seeking to relocate outside of China to diversify their supply chains.
The largest sources of FDI in the second quarter were Singapore, China, Hong Kong, South Korea and the United States.
Indonesia’s economic growth in the first quarter beat expectations, buoyed by high public spending for the country’s elections, but maintaining the strong pace will be challenging due to global developments and tight local monetary conditions.
Southeast Asia’s largest economy grew by 5.11 percent on a yearly basis in the January-March period, the highest growth rate in three quarters. Growth exceeded the 5 percent rate expected by economists polled by Reuters and the 5.04 percent achieved in the fourth quarter.
In the first three months of 2024, campaign expenditure for the Feb. 14 election and higher household spending during the Muslim holy month of Ramadan, which started in March, bolstered economic activity.
That helped offset the hit that Indonesia’s economy has taken from declining commodity exports in the past year. The resource-rich country is the world’s biggest exporter of thermal coal, palm oil and nickel, among other commodities.
The first-quarter growth rate was slower than the government’s forecast of 5.17 percent.
For 2024, the government is targeting growth of 5.2 percent, up from 5.05 percent last year.
In the first quarter, government spending jumped nearly 20 percent annually in the first quarter, versus a growth rate of just 2.81 percent in the previous three months, with higher spending for election and welfare programs to help the poor cope with high food prices.
Household spending grew 4.91 percent on a yearly basis, compared to a 4.47 percent expansion in the previous quarter. Household consumption makes up over half of Indonesia’s GDP.
Investment growth, however, slipped to 3.79 percent in January-March, from 5.02 percent in the fourth quarter.
