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Growth of Foreign Investment in Indonesia and Encountering Problems
Tulus Tambunan Kadin Indonesia Center for Industry and SME Studies, University of Trisakti, 2006
I. Introduction
Despite the 1998’s monetary crisis, Indonesian economic growth has moved toward a positive trend. Nevertheless, the annual relative growth, since then, is lower than other neighbor countries which was hit by the
similar crisis such as South Korean, Thailand, and even lower compared to our relative growth back in 1980’s to middle of 1990’s. It has come to known that there are two major obstacles to barricade the recovery of Indonesian
economic process over the past few years. First, slower rate of business recovery particularly from the most hit companies, big companies, and second, investment activities has not been fully utilized including foreign
investments although the New Governance Era Orde Baru confirmed that foreign direct investments are the most significant factors to boost economic growth rate. The foregoing technology development, product
diversification as well as relative export growth rate are among the most obvious results due to the existence of foreign direct investments in Indonesia.
To sum up, many interrelated factors today are all added to prevent Indonesian businesses and investments recovery to progress according to plan. Ranging from issues frequently mentioned in mass media such as security,
law uncertainty to poor infrastructure situation. In addition, compared to fellow Asian countries such as China and India that has not played any significant role in regional or global economic domain during the Orde Baru
Era, Indonesian competitive advantages has been deteriorated even further. Therefore, learning from the matters previously explained, the main topic to be discussed in this paper is a
complex business environment which in turn stated that investment policies applied should cover all aspects of business area. In other word, no matter how excellent the policy is prepared, the effectiveness of ones’ policy will
depend on factors other than those within the investment policy framework since they will be influential in ones decision making in entering business world in Indonesia.
II. The Growth of Foreign Direct Investments FDI in Indonesia
