Indonesia investment chief questions ASEAN pact as FDI falls

July 22, 2020

JAKARTA (Reuters) – 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 on Wednesday, after data showed foreign direct investment fell for a second straight quarter.

Southeast Asia’s largest economy attracted 97.6 trillion rupiah ($6.7 billion) of FDI in April-June, excluding investment in banking and oil and gas, a 6.9% drop in rupiah terms from a year ago and a roughly 3% fall in dollar terms, investment board (BKPM) data showed.

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

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

BKPM chief Bahlil Lahadalia noted FDI from Singapore had held up despite the city-state posting a 41% quarterly drop in its GDP in the second quarter, which he said showed it was a merely a hub for investment from elsewhere.

“We must begin to rethink whether the ASEAN (Association of Southeast Asian Nations) Economic Community has benefitted Indonesia,” said Lahadalia, adding this was a rational debate and noting 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. The group has had a number of free trade agreements as an economic block and is pursuing further integration in the broader economic sector as well as in political security and socio-cultural matters.

Referring to the coronavirus pandemic’s impact, Lahadalia said he was optimistic FDI would improve in the second half of 2020 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 Tuesday was 89,869 with 4,320 deaths and President Joko Widodo has said the outbreak was not expected to peak until August or September.

(Reporting by Tabita Diela, Gayatri Suroyo and Fransiska Nangoy; Editing by Jacqueline Wong and Ed Davies)

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