Indonesia questions Asean pact as FDI falls for 2nd straight quarter

JAKARTA • Indonesia needs to reconsider the benefits it gets from being part of the Asean Economic Community, the head of the country's investment board said yesterday, after data showed foreign direct investment (FDI) fell for the second straight quarter.

South-east Asia's largest economy attracted 97.6 trillion rupiah (S$9.3 billion) of FDI in April-June, excluding investment in banking and oil and gas. This is a 6.9 per cent drop in rupiah terms from a year ago and a roughly 3 per cent fall in US dollar terms, according to data from Indonesia's investment board, or BKPM.

That followed a 9.2 per cent fall in FDI in the first quarter as investors postponed investment decisions due to the coronavirus pandemic.

Top sources of FDI in the second quarter were Singapore, Hong Kong, China and Japan.

BKPM chief Bahlil Lahadalia noted that FDI from Singapore had held up despite the city state posting a 41 per cent quarterly drop in its gross domestic product in the second quarter, which he said indicated its role as a hub for investment from elsewhere.

"We must begin to rethink whether the Asean Economic Community has benefited Indonesia," said Mr Lahadalia.

He added that this was a rational debate and noted Britain's decision to leave the European Union.

The Asean Economic Community was established in 2015 to integrate the economies of its 10 member states.

It has had a number of free trade agreements as an economic bloc and is pursuing further integration in the broader economic sector as well as in political security and sociocultural matters.

Referring to the impact of the pandemic, Mr Lahadalia said he was optimistic FDI would improve in the second half of this year and was praying for the outbreak not to worsen.

In the second quarter, industries that received the most FDI included power, gas and water, base metals and transportation, warehousing and telecommunications.

Indonesia's coronavirus case count as of yesterday was 91,751, with 4,459 deaths. President Joko Widodo has said the outbreak was not expected to peak until August or September.


A version of this article appeared in the print edition of The Straits Times on July 23, 2020, with the headline 'Indonesia questions Asean pact as FDI falls for 2nd straight quarter'. Subscribe