* Pace of investment growth picks up from Q4
* Investment led by mining despite rule changes
* Infrastructure must improve to lure manufacturing -analyst
By Rieka Rahadiana
JAKARTA, April 23 (Reuters) – Indonesia’s foreign investment
surged in the first quarter of this year, boosted by an
investment-grade credit rating from Moody’s, and the investment
board expected further capital inflows to help spur growth in
Southeast Asia’s largest economy.
Foreign direct investment in Indonesia rose 30.3 percent
year-on-year to 51.5 trillion rupiah ($5.61 billion) in the
January to March period, the board said, exceeding the 25.2
percent rate posted in the last quarter of 2011.
The increase defied recent Indonesian mining regulations and
proposals aimed at boosting government revenue that have scared
off some investors. The mining sector, which accounted for about
12 percent of Indonesia’s GDP last year, took in nearly
one-fifth of foreign direct investment in the first quarter of
this year.
Other sectors drawing investment included transportation,
storage, telecommunications, food, plantations, machinery and
autos, from firms including South Korean steelmaker POSCO
and Hankook Tire.
New investment is key to achieving the country’s ambitious
target of becoming a top 10 global economy by 2025 by selling
more finished products rather than simply exporting raw
materials, while improving its creaky infrastructure to achieve
the president’s 7 percent annual economic growth target.
DRIVING GROWTH
“Although the economies are slowing in many countries such
as the United States and the euro zone, investment activity is
still growing well. This shows that policies taken so far have
been on the right track and the investment climate in Indonesia
is getting more conducive,” said Indonesia investment chief Gita
Wirjawan.
The stronger pace of foreign investment so far this year, in
a quarter that is usually slow, signals that investment will
help to drive robust economic growth this year, said Wirjawan, a
former JPMorgan banker who was also promoted to trade minister
last year after helping to attract record levels of investment.
Indonesia’s economy has benefited since it was awarded
investment grade status by Fitch in December and Moody’s
Investors Service in January. Global bonds it issued last week
drew strong demand, with yields lower than those of some of its
emerging peers and troubled euro zone nations.
The government is targeting 206.8 trillion rupiah in foreign
direct investment this year, which would be an 18 percent rise
on last year’s record 175.3 trillion rupiah. Global investors
are betting on a booming consumer sector and growing demand for
resources from the world’s top exporter of thermal coal and tin.
Indonesia expects investment to make up for slowing exports
this year caused by weaker demand from China and European
nations. The G20 economy last month revised down its 2012 growth
target to 6.5 percent from 6.7 percent, while a Reuters
quarterly poll in April gave a lower estimate at 6.1 percent.
The finance ministry has said it should take advantage of
the country’s investment status to attract more foreign
investment. It is relying on private investors to finance
two-thirds of its nearly $200 billion infrastructure needs until
2014.
“Improvement and realisation of infrastructure projects
could attract more investment,” said Andry Asmoro, an economist
at Bank Mandiri in Jakarta.
(Additional reporting by Andjarsari Paramaditha; Writing by
Aditya Suharmoko; Editing by Neil Chatterjee and Edmund Klamann)
