JAKARTA: Investment in Indonesia rose at a smaller pace in the third quarter and is forecast to grow slowly in 2014 as a weaker global economy continues to damp investor sentiment.
Total foreign and domestic investment rose 23 per cent in the July-September period year-on-year, after increasing 30 per cent in the second quarter, according to data released by the Investment Coordinating Board (BKPM) on Wednesday.
BKPM chairman Mahendra Siregar anticipates growth will continue to be sluggish into 2014, with total investment predicted to rise by 15 per cent.
Economists such as Gundy Cahyadi, an economist at DBS Group in Singapore, blamed the slowing global recovery as the main reason for the slowing investment growth in Indonesia. A weaker rupiah has raised the costs of importing capital goods such as machineries.
"The pace of the global economic recovery has been disappointing," Gundy said in a report distributed here in response to the BKPM data.
"Having seen the rupiah depreciated by more than 10 per cent since May, some investors may choose to hold back for now. Those in for the long ride though would continue to tap into the country's long-term growth potential."
Bank Indonesia, the central bank, forecast the country's economy to expand by as much 5.9 per cent this year, down from 6.2 per cent growth in 2012.
Other concerns abound. As Indonesia holds its legislative and presidential elections in April and August next year, foreign investors may hold back investment on political uncertainty.
Still, total realised direct investment in the third quarter reached a record 100.5 trillion rupiah (RM28.30 billion), which is up 0.7 per cent from the second quarter, according to BKPM data. Mahendra said that this was the first time that quarterly investment realisation had reached 100 trillion rupiah.
In the January-September period total investment rose 28 per cent to 293.3 trillion rupiah from a year earlier, which itself is about 75 per cent of BKPM's 2013 target of 390 trillion rupiah. Investment in 2012 was a record amount.
Mahendra, who was installed as chief of BKPM last month, told a press conference that he didn't have a precise calculation for investment in 2014 yet, except saying that reaching 450 trillion rupiah in investments is "easily achievable."
BKPM will soon release a set of measures to reduce bureaucracy and to improve the ease of investing in Indonesia, he added.
"To achieve more than that, we have to work on accelerating the improvement of business climate in Indonesia and ease of doing businesses," Mahendra said.
Indonesia's investment typically makes up a third of the country's gross domestic product, compared with private consumption, which accounts for 55 per cent of total economic activity.