Indonesia Increasingly Important Investment Destination for Japan
After China and India, Indonesia is currently the third most important investment destination for Japanese investments in the manufacturing sector. In 2011, Indonesia - Southeast Asia's largest economy - was still ranked number five on that list. However, in recent years the country managed to surpass Thailand and Vietnam. This fact indicates the important link between Indonesia and Japan. The chief executive officer of the Japan Bank for International Cooperation (JBIC), Hiroshi Watanabe, confirmed these findings.
Japanese investments in Indonesia are growing. According to data from the Indonesia Investment Coordinating Board (BKPM), Japan was the largest investor in Indonesia in the first half of 2013. In these six months, the country invested approximately USD $2.3 billion in Indonesia, accounting for over 16 percent of total foreign investments in Indonesia during Semester I-2013.
Despite the fact that investments from Japan in Indonesia are growing, Watanabe also mentioned a number of issues which are a concern to Japanese investors. These concerns include lack of quality and quantity of infrastructure in Indonesia, higher minimum wages of Indonesian workers, weak management of human resources, a lack of competitiveness in Indonesia's business environment and, lastly, the country's notorious weak law enforcement.
Japanese companies are attracted by the promising perspectives of Indonesia's domestic consumption as people's purchasing power is rising. The most popular sectors for Japanese investments are in the automotive, electronic goods, energy, and mining sectors.
JBIC, wholly owned by the Japanese government, is the second-largest creditor to Indonesia after the United States. In total, its loans amount to over one trillion yen (USD $10.1 billion).
Investment Realization in Indonesia:
| Country | Q1-2013 |
Q2-2013 | Semester I-2013 |
| Japan | US$ 1.2 B | US$ 1.1 B | US$ 2.3 B |
| USA | US$ 0.9 B | US$ 0.5 B | US$ 1.3 B |
| South Korea | US$ 0.8 B | US$ 0.5 B | US$ 1.2 B |
| Singapore | US$ 0.6 B | US$ 1.4 B | US$ 1.9 B |
Source: BKPM
Click here to download BKPM's official report Domestic and Foreign Direct Investment Realization in Quarter II and January-June 2013.