Potential and Opportunity for Foreign Direct Investment in Indonesia

POTENTIAL AND OPPORTUNITY FOR FOREIGN DIRECT INVESTMENT IN INDONESIA i
POTENTIAL AND OPPORTUNITY FOR FOREIGN DIRECT INVESTMENT IN INDONESIA
Student Name
Institutional Affiliation
Facilitator
Course
Date

POTENTIAL AND OPPORTUNITY FOR FOREIGN DIRECT INVESTMENT IN INDONESIA ii
EXECUTIVE SUMMARY
Today’s business era has become more globalized. Many nations are aware of the benefits
associated with international trade (Giddens 2018, p.19). As a result many nations have tried
their best to improve their economic performance by supporting their national businesses to enter
international trade. Nations have also created conducive business environment to attract and
maintain foreign direct investments. Indonesia is among the richest nations in the Asia-Pacific
region and is among the nations with the largest economies in the world. Its economic
performance has been great for the past 10 years averaging 5.28 percent of economic growth
which is measured by the annual percentage growth of the gross domestic product. Foreign direct
investment has been contributing much towards fostering the Indonesian economic growth.
Currently it contributes more than 20 percent of the total gross domestic product of Indonesia. In
this report, the Indonesian potential and opportunity for foreign direct investment has been
assessed. The assessment has been based on various factors which include some of which
include the Indonesian existing levels of foreign direct investments and foreign currency and
exchange influences among others.

POTENTIAL AND OPPORTUNITY FOR FOREIGN DIRECT INVESTMENT IN INDONESIA iii
Table of Contents
EXECUTIVE SUMMARY...........................................................................................................................ii
INTRODUCTION.........................................................................................................................................1
Political, Economic, Socio-cultural and Technological Influences...............................................................2
Indonesia natural resource competitive advantage........................................................................................4
Foreign currency and exchange influences....................................................................................................5
Indonesian trade policies, barriers and incentives.........................................................................................6
Existing levels of foreign direct investment in Indonesia..............................................................................7
Summary and recommendations....................................................................................................................8
References......................................................................................................................................................9

POTENTIAL AND OPPORTUNITY FOR FOREIGN DIRECT INVESTMENT IN INDONESIA 1
INTRODUCTION
Indonesia is among the best performing richest nations in the Asia-Pacific region. It is also
among the nations with the highest population in the world with a population of 258.7 million. It
embraces free economy where some of its industries are open to foreign competition but still
some industries are protected by the nation’s regulatory policies. According to the 2018 index,
Indonesia is ranked position 69 in terms of economic freedom having a score of 64.2. This is an
increase of 2.3 points due to improvements in the judicial effectiveness, monetary and business
freedom. Indonesia has been improving in terms of economic performance currently having a
growth rate of 5.17 percent which is measured by the gross domestic product growth rate. It has
been ranked position 45 out of the 43 nations in the region of Asia-Pacific. Its economic
performance score is above the expected averages at regional and world levels at large (Booth
2014, p.287).
Currently the world of business has become more globalized. Many nations are aware of the
benefits of international trade. As a result, nations have encouraged and highly supported their
national businesses to venture into international trade. Nations as well have tried their best to
attract and maintain foreign direct investors into their economies in order to foster their
economic growth and easily access commodities which they lack comparative advantage in their
production (Levitt 2014, p.249). Nations have reformed their ineffective economic policies
which hinder foreign investment in their economies. They have also come up with various
incentives in various sectors of their economies which serious require improvement from foreign
investors. Some of these sectors include the technological sectors for the developing nations.
Generally, foreign direct investment occurs when businesses or rather firms from different