SINGAPORE, July 13, 2011 (ANTARA/PRNewswire-Asia-AsiaNet) --
In 1998, nobody ever thought that Indonesia would be in the position. Fast forward 13 years, and Indonesia's Central Bank has seen over US$5 billion of foreign direct investment has been pumped into the country over two consecutive quarters, the fourth quarter of 2010 and the first quarter of 2011.
But why is Indonesian investment at record levels?
Edward Gustely, Senior Advisor Ministry of Finance & Government Investment Unit, Indonesia, explains that compared to the aggregate purchasing power of Australia, Singapore, Hong Kong, and Malaysia, Indonesia is still greater in about US$932 billion of an economy on a PPT basis.
"What's more interesting is that in the last few years, Indonesia has been upgraded and we're one notch below investment grade right now. Now, put that into context. Brazil is at investment grade, Turkey is at investment grade; yet Indonesia among the G20 countries, debt to GDP ratio is only 26%. That is already at investment grade when you look at the aggregate of G20 countries averaging 80% debt to GDP and Brazil at 66%," said Gustely.
While Gustely explains that these are all nice numbers to quote which will provoke investment into Indonesia, what is really holding the country back is the lack of infrastructure investment.
"The balance sheet from the Indonesian government can only fund about a third of the required infrastructure and we're talking US$140 billion worth of investment over the next 4 years. So when you break it down, private equity and investors need to come in with the balance of around US$23 billion every year for the next 4 years, which is no small feat in it of itself, so I put that because unless we get this thing right, all the things that may interest you and your specific category of interest, whether it's buy outs, consumer staples, and natural resources and the like; without the infrastructure as your backbone, it will be a challenge," explained Gustely.
As of the first quarter of 2011, Indonesia managed to raise a reasonably decent US$2.7 billion of foreign direct investment. However what the country needs now is another US$20.3 million of funds to ensure growth Indonesia's infrastructure sector.
The Transport Infrastructure Indonesia, 12-13 October, brings together government, business and thought leaders to reflect on the key challenges facing Indonesia, evaluate the business and investment opportunities brought about in transportation sector.
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SOURCE International Quality & Productivity Centre (IQPC)