Before we start discussing Indonesia FDI by sector, let’s focus on FDI first. FDI stands for “Foreign Direct Investment”. This investment is usually made by a firm or an individual in terms of business. With this investment, they can expand their business from their own country to another.
In short, when an investor starts a foreign business or acquires its business assets, that is when FDI takes place. The other things that they do also include establishing the business that they own or controlling interest in another company. Investors only buy equities from the foreign-based companies.
The FDI Methods and Types:
Even if it is Indonesia FDI by sector, we must also be aware of the methods and types of FDI. There are methods to make FDI happen, which include:
1. Opening a branch, subsidiary, or associate company overseas (in a country of their choice).
2. Acquiring interests in the branch company abroad.
3. Having a joint venture or merging with a foreign company.
Types of FDI include:
1. Horizontal.
A horizontal FDI occurs when an investor opens the same type of business abroad with the one already established in their home country. For example, a Singaporean coworking space opens another with the same concept in Jakarta.
2. Vertical.
A vertical FDI occurs when an investor opens a different type of business overseas from the one they already have in the home country. However, the two types of business operations are still related to one another. For example, a manufacturing company at home has an interest in a company of raw materials from another country.
3. Conglomerate.
A conglomerate FDI occurs when an investor makes an investment in a business abroad that is not the same as the business back home. Since the investor usually has no similar experience, this form is also known as a joint venture.
FDI and Sectors in Indonesia
How is Indonesia FDI by sector going so far? An FDI in Indonesia certainly involves hiring foreign workers. Based on the sector, here are the numbers of foreign workers in Indonesia:
1. Services: 52,633 people
2. Industry: 30,625 people
3. Agriculture: 2,716 people
The statistics above are based on the Manpower Ministry's research and findings in 2017. Meanwhile, here are the most popular FDI's destinations in Indonesia:
- Industrial estate, housing, and office building.
- Machinery, metal, and electronic industry.
- Construction.
- Food, plantations, and crops.
- Transportation, warehouse, and telecommunication.
All the sources above are taken from BKPM. Construction has got the most significant FDI so far, which is USD 13 trillion. Food, crops, and plantations have got the second biggest FDI, which is USD 10.4 trillion. After that, there is warehouse, transportation, and telecommunication sector, which has got USD 10.3 trillion for their FDI.
Still, Indonesia FDI by sector is governed by the government’s negative investment list. However, some things have changed in 2018. To facilitate investors from overseas, Indonesia has established 70 industrial zones for 13 different provinces. These efforts aim to streamline the procedure of the foreign investment.
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