Foreign investment in Indonesia can rise to a record $32.8 billion this year, a government agency projected, even though the pace of increase last year slowed.

For 2013, foreign commitments rose to 270.4 trillion rupiah an increase of 22.4 percent compared with the previous year’s 26 percent gain in rupiah terms.

But last year’s performance appeared little improved from 2012 in U.S. dollar terms, as the 2013 total is equivalent to about $22 billion at the rupiah’s current exchange rate. A weak rupiah, declining commodity prices and uncertainty over mineral export policies all took a toll on foreign investor confidence.


The rupiah weakened more than 20 percent against the dollar in 2013, partly due to high inflation and the country’s large current-account deficit.

Foreign investment commitments reached 71.2 trillion rupiah in the October-December period, 25.4 percent more than a year earlier in rupiah terms. The increase, an eighth straight quarterly record, underlines the attraction of Southeast Asia’s biggest economy, its vast natural resources and fast-growing middle class.

After expanding by more than 6 percent in four of the past six years, Indonesia’s economy has begun to flag, hurt by declining export proceeds amid weak commodity prices and volatility in consumer spending in the wake of rising fuel costs and higher interest rates.

But while many foreign investors have retreated from Indonesia’s financial markets, the world’s fourth most populous country remains a big draw for multinational companies. In the third quarter of 2013, investment commitments were 67.0 trillion rupiah, or 18.4 percent above the year-earlier figure.

The Indonesian FDI numbers do not include investments in the oil and gas sector. – Reuters