A record US$5.9 billion in foreign direct investment flowed into Indonesia in the third quarter, showing that Southeast Asia’s biggest economy remains resilient in the face of a bleak global outlook, the country’s investment board said on Monday.

In rupiah terms, total FDI in July to September rose 22.00 per cent year-on-year to 56.6 trillion rupiah (US$5.90 billion), after 30.2 per cent annual growth in the second quarter. The third quarter number is a record for any quarter.

Indonesia’s economy is projected to grow 6.1-6.5 per cent in 2012, relying on foreign direct investment and domestic consumption as exports turn negative due to weak demand from its main trade counterparts.

The country has drawn strong portfolio funds and FDI in recent months after it regained investment grade status from two rating agencies.

Indonesia recorded a total FDI of 175.3 trillion rupiah in 2011, rising 18 per cent from a year earlier.

According to the board, base chemical, mining, and transportation-telecommunication industries supported FDI growth in the third quarter, growing 17.6 per cent, 16.8 and 12.8 per cent year-on-year respectively.

Singapore and Japan were the top two foreign investors from January until September, Investment Chief M Chatib Basri said.

“In 2013, it will be difficult to achieve total investment targets due to the global economic slowdown,” Basri added.

Indonesia booked total FDI of 107.6 trillion rupiah in the first half this year, led by mining and manufacturing.

“The trend is still positive in the third quarter,” said David Sumual, economist at Bank Central Asia in Jakarta. “But the problem is how quickly government is able to provide infrastructure to support the investment.

“If government fails to address this issue, I’m concerned that Indonesia will be stuck, it will decelerate growth of investment,” he added.

Indonesia is a favourite for emerging market investors because of its large domestic market, stable public finances and low debt.

Domestic consumption makes up more than 50 per cent of gross domestic product supported by a rising middle class and low interest rates.

Among the quarter’s notable foreign investment deals, Japanese auto parts maker Denso Corp announced in September that it would build a new plant in Indonesia worth US$110 million that will start operations in February 2014.

The announcement came two months after Indonesia’s investment board give the okay to Italian Pirelli’s to construct a US$126 million plant.

However increasing labour unrest is affecting Indonesia’s reputation as an attractive investment destination.

Last year, workers at Freeport McMoRan Copper & Gold’s unit in Indonesia staged a three-month strike at the company’s Grasberg mine in Papua in the biggest industrial dispute in the country.

Hundreds of thousands of factory workers went on strike and rallied on October 3, demanding improvement in contracts and better pay for 16 million outsourced workers in the world’s fourth most populous nation.

The unrest has pushed the government to draft a regulation that should improve conditions for workers not on fixed contracts.

Under the new rules, temporary workers who move to a different company will be able to count their total period of employment cumulatively if they are dismissed.

Source: South China Morning Post