INDONESIA’S foreign direct investment (FDI) grew at the fastest pace since 2013 on yearly basis in the second quarter — a bright spot in an othwerwise weak economic outlook.

    Annual growth in Southeast Asia’s largest economy was only 4.71 percent in the first quarter, the slowest since 2009, and Bank Indonesia predicted second quarter growth to be just as weak as domestic consumption wanes and exports fall.

    Last year was an election year, which tended to reduce investment and consequently its contribution to economic growth. But in April to June Indonesia recorded 92.2 trillion rupiah (US$7,376 billion) of realized FDI, the investment board said yesterday, up 18.2 percent from a year ago, and accelerating from 14 percent growth in the prior three months.

    “Investment has kept on going despite economic slowdown,” said Franky Sibarani, chief of the investment board.

    The FDI data, which exclude banking and the oil and gas sector, was reported in rupiah terms with an exchange rate of 12,500 per U.S. dollar, 7 percent stronger than the current rate of around 13,450 yesterday, which would reduce the FDI increase in dollar terms.

    David Sumual, Bank Central Asia’s economist in Jakarta, said previous reports of FDI had shown an uptick in rupiah terms when it actually contracted in dollar terms. But in the second quarter of this year, he said, the data looked more promising.

    “This looks like investment has actually risen, which is good because going forward, the only source of economic growth would be investment and government spending,” said Sumual, adding he expected positive results from President Joko Widodo’s multiple foreign trips to promote investment.

    Widodo said he wants to rely on foreign investment as a new economic growth engine to help achieve a target of 7 percent average annual economic growth in his presidential term, which ends in 2019.

    Indonesia’s investment board said the country needs 3,518 trillion rupiah of investment from both domestic and foreign sources to achieve that growth target.

    In April, Widodo’s administration simplified business tax arrangements, hoping the incentive would bring in more investment.

    “Some of the government’s policies are investor friendly, but some others are not, particularly in the oil and gas, agriculture, and cement industries.

    (SD-Agencies)