Indonesia's foreign investment outlook

Steps in the right directionIndonesia's government appears to be keen on opening up the country more to investment, but it will be a slow and challenging process.

Cold storageForeigners will be able own 100% of cold storage businesses across the country. Ownership is currently capped at either 33% or 67%, depending on the region.

E-commerceReversing course from a 2014 decision, the government is planning to open up the industry 100% to foreign investment provided the investment is worth more than 10bn rupiah.

PowerForeigners will be allowed 100% ownership of geothermal power plants of more than 10 megawatts, and ownership for smaller plants will be capped at 67%. Foreign investors currently are not allowed own a stake in smaller plants.

Sugar & rubber Foreigners will be allowed to own sugar and rubber manufacturing firms, as long as they are willing to source up to 30% of raw material from local farmers.

Planned revisions to Indonesia's negative investment list:

Security concerns inIndonesia may deter

the timing of investmentor perhaps even reduce

the likelihood of someprojects beginning.

AN UNCERTAIN FUTUREHopes for Indonesia's economic development have been dented by a slowdown in consumer spending and rupiah weakness, which has raised input costs for manufacturers.

201448.5AUGUST

46.4MARCH

© The Economist Intelligence Unit, 2016

52.7JUNE

& JULY

Nikkei Indonesia PMI, 2013-2015

That shrinking feelingIndonesia’s manufacturing sector has steadily contracted in 2015. The next few years for industrial Indonesia may be characterised by falling output.

2013 2015

A reading below 50 signifies contraction

IND

ON E S I A

INDUSTRIA

L

881.12020

776.52019

Passenger car registrations (units 1,000s)

Sponsored by Shell

After a lull, passenger vehicle registrations are expected to rev higher

The need for wheelsA rebound in consumer spending will likely spur production growth over the longer term.

Sources: BKPM, Herbert Smith Freehills, The Investment Coordinating Board of Indonesia, Markit, The Economist Intelligence Unit forecasts, Reuters, local news media.

330.62009

517.42012494.7

2011424.42010

Consumer spending (US$bn)

508.52014

501.72015

517.42013

593.62017

681.12018

529.42016

FDI targeting Indonesia's secondary sector

Lower gearForeign investment in Indonesia’s secondary sector has cooled since 2013.

Share of total FDI (%)

FDI (US$bn)

3US$bn

2010

21%

35%7

US$bn

12US$bn

16US$bn

13US$bn

2013

2012

2011

2014

2015*

48%

41%

46%

55%

9US$bn

AN UNCERTAIN FUTURE

880781601541359 737 810 875 926 978 1049880

* Data for 2015 is from January-September

Forecast2016 - 2020

IND

ON E S I A

INDUSTRIA

L