The Inflow Of Foreign Direct Investment In Indonesia

In the era of globalization, international trade and international investments are expanding at exponential rates. Almost all developed countries are involved in Foreign Direct Investment processes, both in the form of outward and inward FDI. Among those developed countries there is the case of Japan that is different; Japanese attitude towards FDI has always been, in fact, very cautious. One one hand, Japanese outward foreign investment and exports have played a fundamental role in the postwar period of economic rise; on the other hand, the accesses to the domestic market by foreign investors, the so called Inward FDI, has been very limited. (Paprzycki, Fukao, 2008).

According to Eryigit (2012), “Foreign direct investment (FDI) is defined as establishing a new company or branch of a foreign company by foreign investor or share acquisitions of a company established in host country (any percentage of shares acquired outside the stock exchange or 10 percent or more of the shares or voting power of a company acquired through the stock exchange”. According to Fadli, Norazidah, Rhaudhah, Nurul, Salwani and Kamaruzaman (2011), stated that Malaysia one of the developing country that being openness to foreign country in order to attract foreign investor to maintain an accelerate growth to this country. They also stated that foreign direct investment plays an important role in capital formulation and economy growth

Foreign direct investment by multinational corporations is the action of obtaining controlling equity share of a firm in a foreign country. There has been many discussions about the role of FDI in affecting a country’s unemployment rate and economic growth. Of which many believed

Indonesia has a high rate of political risk because of the corruption, weak judicial system, and fragile infrastructure. Indonesia has several issues that conflict with promoting foreign investments including: a poor government performance, low wages, and a conflicting religious concerns. Indonesia is making changes to its government regulations and restrictions, and increasing funding for infrastructure. Religious concerns are more difficult combat because the majority of the population is Muslim (nearly 88%), although most of the community is supportive and open to democratic values. There is only a very small portion that are radicals and engage in violent behavior and terrorist acts.

As the world’s largest Southeastern Asian economy with a population of over 200 million, Indonesia possesses attractive prospects for business and enterprise. Alongside the election of President Widodo who intends to increase foreign investment and improve infrastructure, this could serve as an opportune time to get involved with the island nation.

Indonesia is a developing nation that has reached milestones in its progress starting with its move into democracy into the efforts of stabilizing its economic fluctuations. According to WorldBank.org, the 2014 inflation rate was estimated to be 6.4%. Also, the GNI per capita has been steadily increasing since 2000, which was $2200 into a surprising $3524 in 2014. With a population of 249.9 million people in 2013, a Gross Domestic Product of $863.3 billion and a growth rate of 5.8% in 2013 (WorldBank.org), along with the explosive growth middle class and their consumptive nature, Indonesia is a prime target for foreign direct investments from all over the globe. Also, as seen in DoingBuisness.org, the ease of starting a business has risen in rank since last year. With a growing access to electricity in more areas (DoingBusiness.org) and the government’s lenient

In today 's developing economies the competition to attract foreign investment and expanding trade relations has become the foremost economic strategy to satisfy the quest of the society for rapid economic growth. The failure of inward-looking economic policies to change the trajectory of decades long stagnated economies forced countries to adopt outward-looking trade policies and market economy. As a result, attracting foreign investment and promoting exports emerge to be the core economic and trade strategies. Foreign investment is believed to provide multidimensional benefits to the host economy both directly and indirectly. The main direct benefit is the capital inflow that fills the finance gap between the required investment and

The country's economy is in the trillion-dollar class, and ranks 16th in the world, just below Canada and just above Turkey (CIA World Factbook, 2012). With ranks of 27th in the world for exports, 30th for imports, 34th for inbound FDI and 37th for outbound FDI (Ibid), Indonesia's flows are much greater than its globalization ranking would indicate. This points to trade barriers as being a drag on its KOF score. These figures at least to some extent tied to commodity prices, as Indonesia's exports and inbound FDI in particular are tied to its mineral and forest wealth (World Bank, 2010).

In 2004, Indonesia overall score dramatically decreased. It was mainly due to a decrease of its monetary and investment freedom indicators (see Exhibit 4 and 5 relatively). Whereas its rapidly increase from 2005, it was mainly due to an increase of its trade (see Exhibit 6) and again monetary freedom indicators.

Kenya has recently experienced a surge in foreign direct investment (FDI) following a period of substantial declines in FDI inflows near the turn of the century. Net FDI flows to Kenya have not only been highly volatile but also generally declined in the 1980s and 1990s. Kenya’s total FDI as a percentage of GDP rose from 4.21 percent in 1980 to 7.39 percent in 2000 however this declined to 5.17 percent in 2006 and currently FDI as a percentage of GDP is a 7.52 percent (UNCTAD, 2014). The investment wave of the 1980s dwindled in the 1990s as the institutions that had protected both the economy and the body politic from arbitrary interventions were eroded. The FDI inflows to Kenya since 2008 have considerably improved from $96Million to $514Million in 2013. In recent years, China has emerged as a key source of FDI in Kenya.

Loots, E. (000) "Foreign direct investment flows to African countries: Trends, determinants and future prospects". Paper presented at the African Studies Association of Australasia and the Pacific 22nd Annual and International Conference, Perth, April, 2000.

The main determinants are openness to trade and political stability in the study. The results show that FDI stimulates the economic growth but growth does not attract the foreign direct investment. In fact the openness trade and political stability are the significant determinants.

for FDI in UNCTAD’s World Investment Prospects Survey in 2010. Macro and micro economic analysis uncovered that

Foreign direct investment (FDI) inflows rose from $24.5 billion in 2003 to $76.2 billion in 2010. Intra-ASEAN capital flows have increased more than fourfold, accounting for 16.1% of the regional total in 2010 compared to 11.1% seven years ago. Only the EU contributes more.

In fact, FDI is said to be the most important contributing factor for Malaysia’s economic performance. The early beginnings of luring foreign investors to Malaysian soil started with the introduction of the Investment Incentives Act 1968, and followed by the establishment of the Free Trade Zones (FTZs) during the Second Malaysia Plan (1971-75). Since then, Malaysia has attracted a large portion of the investment dollar that flowed into Asia. In 1995, for example, Malaysia was the second largest FDI recipient among Asian economies at US$ 5.8 billion.