Indonesia, meanwhile, has experienced more than a one-third decrease in foreign direct investment (FDI). In the second quarter of 2023, FDI numbers dropped 6.95%. As a result, total FDI declined to 202.2 trillion rupiah, or about $12.3 billion. This reduction constitutes the biggest decline in foreign investment since 2018, under the presidency of Prabowo Subianto.
On July 29, President Prabowo Subianto hosted Malaysian Prime Minister Anwar Ibrahim. This was their first major meeting, held at Merdeka Palace in Jakarta. The two leaders strolled together, impromptu style, in an animated exchange on the virtues of sustained regional cooperation. Their discussion focused on how to address today’s economic headwinds.
Investors are losing FDI confidence. They are now taking a step back to reassess how things are going with Prabowo Subianto’s reign, especially as the geopolitical tides remain ever-fickle. Even more indicatively, analysts argue that this pause is part of an overall reluctance for anyone to commit resources without knowing what the administration plans to do long-term.
The 6.95% drop in foreign investment comes as various sectors within Indonesia face challenges and potential shifts in policy that may affect business operations. Investors apparently appear to be taking a wait-and-see approach, which would dampen economic growth in the longer term if it continues.
Shifting geopolitical tensions are adding to worries about economic stability. Consequently, companies interested in doing business or investing in Indonesia are taking a warier stance. The convergence of these factors has resulted in a powerful, historic redirection of investment priorities among international companies.