Despite being the largest economy in ASEAN, Indonesia only attracts 10% of the region’s foreign direct investments (FDI), significantly overshadowed by Singapore’s 50%. To combat this, Indonesian officials are prioritizing clean energy and human resource development to enhance investment appeal.
Indonesia’s Minister of Investment, Rosan Roeslani, highlighted the disproportionate distribution of FDI within ASEAN, noting the vast potential for growth in Indonesia given its size and demographic advantages. The current focus is on shifting towards sustainable energy investments and improving human capital to avoid the middle-income trap.
Despite its economic size, Indonesia lags behind with only 10% of ASEAN’s FDI, compared to Singapore’s dominant 50%. This gap underscores the need for Indonesia to enhance its investment conditions to attract more foreign capital.
The Indonesian government is set to foster investments in clean energy and carbon-neutral projects as part of its commitment to environmental sustainability and to meet the increasing global demand for green technology.
Rosan Roeslani points out the necessity of developing human capital alongside physical infrastructure to support sustained economic growth. The focus is also on creating integrated industrial zones that fully utilize clean energy, drawing inspiration from successful models in neighboring countries like Vietnam.
Indonesia needs to build competitive incentives similar to those in Singapore and Vietnam, where significant advancements in clean energy have attracted robust international investments, particularly in sectors like EV battery and manufacturing.
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The strategy includes enhancing the trade of carbon credits and further developing eco-friendly industrial zones. These efforts are intended not only to catch up with regional competitors but also to lead in attracting green investments.
For Indonesia to compete effectively on the ASEAN stage, it must continue to adapt its policies to attract more sophisticated and environmentally conscious investments. The planned enhancements in clean energy and human capital development are steps toward positioning Indonesia as a more attractive destination for global investors.
Singapore dominates ASEAN investment, but Indonesia is taking significant steps to boost its appeal by focusing on sustainable development and improving investor-friendly policies. These initiatives are crucial as Indonesia aims to increase its share of regional FDI and enhance its economic stature in Southeast Asia.
Source: Go Kepri (2024)
