Indonesia calls for rethink on Asean economic pact as foreign investment sinks

The country’s investment chief’s comment comes after FDI fell for a second straight quarter

Bahlil Lahadalia said he was optimistic the cash inflows would improve in the second half of 2020 and was praying for the Covid-19 outbreak not to worsen

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The Suralaya power plant in Banten, Indonesia. Photo: Handout

Published: 6:38pm, 22 Jul 2020Updated: 6:40pm, 22 Jul 2020

Indonesia needs to reconsider the benefits it gets from being part of the Asean Economic Community, the head of the country’s investment board said on Wednesday, after data showed foreign direct investment fell for a second straight quarter.

Southeast Asia’s largest economy attracted 97.6 trillion rupiah (US$6.7 billion) of FDI in April-June, excluding investment in banking and oil and gas, a 6.9 per cent drop in rupiah terms from a year ago and a roughly 3 per cent fall in dollar terms, investment board (BKPM) data showed.

That followed a 9.2 per cent fall in FDI in the first quarter as investors postponed investment decisions due to the coronavirus pandemic.

Top sources of FDI in the second quarter were Singapore, Hong Kong, China and Japan.

BKPM chief Bahlil Lahadalia noted FDI from Singapore had held up despite the city state posting a 41 per cent quarterly drop in its GDP in the second quarter, which he said showed it was a merely a hub for investment from elsewhere.

“We must begin to rethink whether the Asean (Association of Southeast Asian Nations) Economic Community has benefited Indonesia,” said Lahadalia, adding this was a rational debate and noting Britain’s decision to leave the European Union.