SECTORAL AND HOME COUNTRY DISTRIBUTION OF FOREIGN DIRECT INVESTMENT IN INDONESIA

Abstract

This study investigates the distribution of Foreign Direct Investment (FDI) across Indonesian economic sectors and home countries. Using descriptive statistics analysis of secondary data, the result shows that on average, FDI dominated the share of total investment, while domestic investment (DI) led the number of projects in Indonesia. FDI and DI mostly inflow to the chemical and pharmaceutical industry which is a part of manufacturing industries. The largest contributions of total FDI share come from Singapore and Japan. Investors from Japan reached the largest share of investment while investors from Singapore dominated the number of projects across Indonesian regions. Singapore reached the highest FDI share in Banten, Jakarta, Jawa Timur, Kalimantan Barat, Kalimantan Selatan, Kalimantan Tengah, Kepulauan Riau,Riau, Maluku Utara, Papua Barat, Sulawesi Utara, Sulawesi Barat, Sulawesi Selatan, and Sumatera Utara. Japan experienced the highest FDI in Jawa Barat and Jawa Tengah. This study can map the preference of investors from each home country. Investors from Australia and Mauritius mostly preferred to invest in the coal mining sector. Investors from Japan mostly preferred transport-related industries especially the industry of spare parts and accessories for four or more wheel motor vehicles. Investors from Singapore mostly selected telecommunication industries. Investors from South Korea mostly preferred to invest in plastic-related industries and processing industries. Some Investors from China invested in the electricity industry. Many investors from France also invested in the water supply sector. And Investors from the Republic of China mostly preferred to invest in the pulp, paper, and paperboard industry. The Indonesian Government needs to concern about the general characteristics of investors in home countries in attracting foreign investors. For policy purposes, knowing such characteristics provides scientific reasons for a government to have distinct strategies between different targeted home countries in order to attract foreign investors.