Papua one of the main destination for FDI

The capital Jakarta was the main destination for FDI in the first half with $1.9 billion, followed by East Java and Papua with $500 million and $200 million respectively.

Indonesia expects foreign direct investment to rise more than expected this year, as new and existing investors are drawn by strong consumer demand and increased stability in Southeast Asia’s biggest economy.

The surge in FDI could improve Indonesia’s prospects of achieving a much-coveted investment grade credit rating, by providing a more stable source of longer-term investment which would in turn create jobs and spur growth.

The capital Jakarta was the main destination for FDI in the first half with $1.9 billion, followed by East Java and Papua with $500 million and $200 million respectively.

“The sentiment is much more positive. People are talking about Indonesia, good or bad, which is important,” said Madhu Koneru, executive vice president of UAE coal firm MEC Holdings, which is investing $5.2 billion in an Indonesian project.

Gita Wirjawan, head of the investment co-ordinating board, on Wednesday said foreign direct investment was forecast to reach 118.4 trillion rupiah ($13.1 billion) in 2010, an increase of 25 percent from last year’s realised investment of $10.5 billion. Previously, the government expected FDI to rise 15 percent.

The past 18 months has seen a stampede by foreign and local investors into Indonesian stocks, bonds, and the rupiah because of political stability and strong economic growth.

If Indonesia gets an investment grade rating the government would face lower borrowing costs, for example to improve ailing infrastructure which in turn would help attract investors.

A move to investment grade, which would put it alongside BRIC nations such as Brazil, would also help deepen capital markets. The stock exchange plans to ease rules to attract foreign listings, such as miners, a director said on Wednesday.

Source: FOREXYARD

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