INDONESIAN ECONOMY

BALANCE OF PAYMENT AND FOREIGN DIRECT

INVESTMENT IN INDONESIA

Nahdy Niza Mustafa (1312000214)

Bachelor Degree of Management
International Class Program
Faculty of Economics, ABFII Perbanas
2015

INTRODUCTION

Indonesia Balance of Payments Statistics (Neraca Pembayaran Indonesia) is one of the

important macro-economic statistics for Indonesia among a number of other macro-economic
statistics, such as Gross Domestic Product (GDP) and the money supply. These statistics provide
information about economic transactions that take place between the Indonesian populations
with non-residents in a certain period. Same as most statistical compilation of balance of
payments in other countries, the Indonesia balance of payments statistics is made with the
following objectives: (1) determine the role of the external sector in the economy; (2) determine
the flow of resources to another country; (3) determine the structure of economy and trade; (4)
determine the problem of foreign debt; (5) determine changes in foreign exchange reserves and
the potential pressures on the exchange rate; (6) as a source of data and information in preparing
the budget to foreign exchange; and (7) as a source of data compilation national accounts
statistics (national accounts)
Transactions are recorded in the balance of payments showed a change, giving (without
compensation), arising out of or abolishment of an economic value. The economic rate
movements may occur as a result of transfer of ownership of goods or financial assets, provision
of services, labor supply, or the supply of capital. Here are examples of transactions that are
recorded in the balance of payments:
(1) The sale and purchase of goods with other countries, such as palm oil exports and
imports of raw materials or consumer goods;
(2) Provision / use services to / from other countries, such as the provision of services of
a stockbroker by domestic securities firms to foreign investors and the use of foreign
ships transporting services by domestic companies;
(3) Income on investments, such as dividends and interest earned by foreigners who
invest in Indonesia and Indonesian residents who invest abroad;
(4) financial investments among others in the form of stocks and bonds, such as the
purchase of Bank Indonesia Certificates (SBI) by foreign investors and the sale of bonds
US government owned by domestic banks; and
(5) Provision / receipt of money, goods, and services without any direct reward, such as
government revenue in the form of grants from foreign countries.
Closely related to the balance of payments statistics that describe the flow (flows) of
goods, services, and investment in a particular period, there is one statistic reflects the value of
international investments at a certain time (stock), the Indonesias International Investment
Position statistics (Posisi Investasi Internasional Indonesia-PIII). In these statistics there is
information on the value of financial liabilities (foreign investment in Indonesia) and financial
charges (Indonesian investment abroad) Indonesia country at a late period, for example at the end
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of the year. If the liability is greater than the bill, means foreign investment in Indonesia is
greater than the population of Indonesia investment abroad. Interpretation otherwise apply if
liability is less than the bill. PIII changes in a given period can be caused by four things: (1) the
addition or subtraction bill transactions and financial liabilities (which are recorded in the
balance of payments); (2) changes in exchange rates; (3) changes in the price of financial
instruments, and (4) other adjustments, such as debt relief (write off).
CPI data and PIII utilized by various users. At the level of general understanding, the data
can be used by students, faculty, or financial economics reporter. A more detailed understanding
of the data, among others, are required by economists, academic researchers, investors,
international rating agencies, international financial institutions, and compilers of National
Accounts.

TABLE OF CONTENT
Cover
Introduction
Table of Content

CHAPTER I : INDONESIA BALANCE OF PAYMENTS

CONCEPTUAL FRAMEWORK

DEFINITION
Definition of the Balance of Payments
The purpose of Balance of Payments
International Economic trades
CONCEPT OF TRANSACTION
Recording Transaction Period
Dual Entry System
Errors and Omissions
Transaction valuation
Calculation and Conversion Unit
CONCEPT OF RESIDENCY / POPULATION
CLASSIFICATION STANDARD BALANCE OF PAYMENTS
Current Account
Capital and Financial

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10
11
CHAPTER II : INDONESIAS BALANCE OF PAYMENTS
13
PRESENTATION FORMAT Indonesia's Balance of
15
Payments: Summary
15
Indonesias Balance of Payments: Current Account
16
Indonesias Balance of Payments: Capital and Financial
Indonesias Balance of Payments: Government Sector and 19
the Monetary Authority Financial Transactions
21
Indonesia Balance of Payments: Private Sector Financial 21
Transaction
22
CHAPTER III : DIRECT INVESTMENT
22
CONCEPTS AND DEFINITIONS
22
CLASSIFICATION
Indonesias Investment Realization Progress Quarter I 25
2015
27
Investment Realization in Quarter I 2015: Based on Sector
29
Investment Realization in Quarter I 2015: Based on Location
30
Investment Realization in Quarter I 2015: Based on Country
31
Origin
32
Indonesian Labor Absorption Progress 2010March 2015:
32
Per Quarter
Progress of Investment Realization 2010March 2015: Per 33
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Quarter
REFERENCE

CHAPTER I : INDONESIA BALANCE OF PAYMENTS CONCEPTUAL

FRAMEWORK

DEFINITION
Definition of the Balance of Payments
Indonesia's balance of payments (NPI) is recording economic transactions occurring
between resident to non-Indonesian residents in a certain period.
Balance of payments is a summary of statements or statements which basically say all
transactions made by a resident of a country with residents of other countries and all of them are
recorded in a certain period, usually a calendar year. (Salvatore, 1997: 67)
Balance of payments is a systematic document of all economic transactions between
residents of a country with the population of another country within a specified period, usually
one year. (Apridar, 2009: 135)
Sukirno (2004: 390), defines the balance of payments as a financial flow records that
show the value of trade transactions and the flow was conducted among a country with other
countries in a given year.
From the various definitions above, it can be concluded that the balance of payments is a
systematic record that includes international transactions of a country with the population of
another country in a given period is usually one year.
The purpose of the Balance of Payments
The main purpose of balance of payments is to provide information to the government
about its financial position, particularly with regard to the results of the practice of economic
relations with other countries. The balance of payments can also help in decision making in
monetary, fiscal, trade and international payments.
Preparation of the balance of payments has several objectives, including the following:
a. As the material information to the government about the international position of the
country concerned.
b. As the material for the government to make decisions in the field of trade policies,
payments affairs.
c. As the material to assist the government in making decisions in the field of monetary
and fiscal policy.
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While the function of the balance of payments is as follows:

a. As an accounting tool and means of payment abroad for the government to take a
decision, whether the state can resume the entry of foreign goods and be able to complete
the payment on time.
b. As a tool to explain the influence and abroad transaction on national income.
c. As a tool to measure the state of the economy in international relations of a country.
d. As a tool of monetary policy which will be implemented by a country.

International Economic trades

International economic transactions according Reksoprayitno (1995: 56), is an economic
transaction conducted by a resident of a country that has a balance of international payments.
Just like the other balance-sheet and in accordance with accounting principles generally, the
balance of payments records transactions plus and minus. The plus transaction is called a credit
transaction (credit), whereas the minus transaction called debit transactions (debit).
In terms of the balance of payments accounting must always be balanced, in the sense
that the number of debit transactions is equal to the total value of credit transactions. Debit
transaction occurs when transactions creates or result in increased liability for the residents of the
country's balance of payments for reduced rights for the country's balance of payments resident
to receive payments from residents of other countries.
In the balance of payments, which contains posts debit transactions are usually marked
with a sign (-). While the credit transaction occurs when a transaction creates or lead to increased
rights for residents of other countries or result in reduced liability for the residents of the
country's balance of payments to hold payments to residents of other countries, this transaction is
usually marked with a plus sign (+).

CONCEPT OF TRANSACTION
Economic transactions are recorded in the balance of payments was mainly due to the
exchange or transfer of economic value between residents and non-residents of Indonesia. In one
exchange, the Indonesian population gain / relinquish ownership of economic value by giving /
getting possession of other economic values of non-residents. While for transactions resulting
from the transfer, an economic value given or received by the Indonesian population with no
reply other economic value.

Economic transactions, even without the exchange or transfer, can still be recorded in the
balance of payments. The way of recording this transaction is more commonly known as imputed
transaction. An example is the recording of the net earnings (excluding dividends) foreign
investment company (PMA) components reinvested profits (reinvested earnings) in the NPI. In
general, economic transactions are included in the balance of payments can be divided into two
groups:
(1) Goods, services, revenue (income) and current transfer;
(2) Capital / financial
Transactions within the group (1) are part of the current account, while transactions in the
group (2) are part of the capital and financial (capital and financial accounts).

Recording Transaction Period

Recording of economic transactions in the balance of payments is basically done in the
event of transfer of ownership between residents of Indonesia with non-residents with a value
based on the agreement of both parties. This is consistent with the principle of accrual
accounting, which requires revenues and expenses are recorded when incurred, not the time of
settlement (settled) which may take place some time later.
In the current account, transfer of ownership is considered to occur when the legal
ownership of an item changes, when a service has been provided, and when income increases /
decreases. As for financial transactions, a change of ownership occurs when the transaction
appeared in the books of the transaction, i.e. when the financial asset or liability acquired abroad,
released with the agreement, is sold, or repaid. Assets in the form of commitment or pledge are
not regarded as an economic transaction, so it will not be recorded in the balance of payments.
Thus, the addition of foreign debt will be recorded in the balance of payments in the event of an
actual withdrawal; while the payment should be recorded when the debt is due, not when the
actual payment.
Practically, recording by accrual is difficult to implement. Often, the data source
determines the timing of recording of a transaction in the NPI. For example, exports and imports
of goods transactions are recorded in the balance of payments when the goods cross the border of
Indonesia, represented by customs documents which constitute the main data source of this
transaction. The recording time may vary with time recording exporters / importers in their
books, but this practice is considered the best proxy to establish a change of ownership.

Dual Entry System

Recording transactions in the balance of payments is done double-entry accounting
system (double entry). With this system, every economic transaction that was recorded in two
different entries with the same value. Recording is done from the standpoint of the Indonesian
population. For example, receiving food aid from abroad will be recorded as imports of goods
and the receipt of a transfer; oil exports by the government will be recorded as exports of goods
and receipts of foreign exchange reserves.
The second entry is recorded as a debit and credit transactions in accordance with
generally accepted accounting practices. In the current account, a debit transaction to nonresidents spending and credit transaction constitutes acceptance of non-residents. In the capital
and financial transactions, debit transactions showed an increase in assets or decrease in
liabilities to non-residents, while credit transactions showed a decrease in assets or an increase in
liabilities to non-residents. Conventions used in the marking of the transaction debit / credits in
the balance of payments are: debit transactions indicated by a dash (-) and credit transactions
indicated by the sign (+).

Errors and Omissions

If the principle of double entry is applied to every economic transaction, the total number
of entries in the balance of payments will be equal to zero. In practice this will not occur because
of differences in data sources used to record two entries (debit and credit sides) of the
transactions. Some transactions may not be measured accurately, resulting in the recording errors
(errors). Meanwhile, some other transaction may not be recorded at all, which resulted in fewer
notes (omissions).
Once the entire entries recorded in accordance with the transaction in the current account
and the capital and financial account, the sum of both will produce net debit or net credit. To
compensate for the net debit or credit card is used the account balance, the net errors and
omissions. In practice it is not easy to determine the source of errors and omissions of this,
whether it comes from the current account or capital and financial transactions.

Transaction valuation
International standards require transaction assessed based on its market price market
price is defined as "the amount of money paid by a buyer who is willing (willing buyer) to
acquire something from a seller who is willing (willing seller); exchanges are made between
independent parties on the basis of purely commercial considerations'. In practice, the transaction
price is used as a proxy for the market price. The transaction price is the price of a transaction
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that was recorded in the books transactions or in the administrative record that is used as a data
source.

Calculation and Conversion Unit

NPI statistics compiled in the currency of US dollars. Transactions denominated in rupiah
or foreign currency converted to US dollars using the exchange rate (the midpoint between the
buying and selling rates) prevailing at the time of the transaction. If the information is not
available then use the average middle rates during the period of the transaction.

CONCEPT OF RESIDENCY / POPULATION

Judging from the culprit, economic transactions carried out by institutional units that can
be a person, legal entity, or other entity. Recording the transaction in the balance of payments
made throughout the transaction is conducted between the Indonesian population with nonresidents.
Indonesia's population was defined as institutional units which have a center of economic
interest (center of economic interest) in Indonesia. An institutional unit is said to have a center of
economic interests in Indonesia when it has or plans to engage in economic activities and
transactions (live, produce, consume, invest, and / or earn) in Indonesia for one year or more.
In the balance of payments statistics, the population of Indonesia is composed of:
(1) Government agencies consists of the central government, local government and nondepartmental government agencies. Indonesian embassies and consulates abroad is Indonesian
territory that fall within the definition of the Indonesian population; otherwise a foreign country
Embassy in Indonesia is not a resident of Indonesia;
(2) The financial institution and the company that is not a financial institution which
includes all companies involved in the production of commercial goods and services in the
territory of Indonesia. The company can take the form of incorporation or not incorporation;
owned / controlled by the government (BUMN) / private (BUMS); or owned / controlled by
domestic / foreign. A branch of foreign companies in Indonesia is a resident of Indonesia, while
Indonesian company branches abroad are not included residents of Indonesia;
(3) Non-profit organizations, the institutions that produce goods and services in the
territory of Indonesia is not for the purpose of obtaining financial income. Examples are religious
institutions and social institutions.

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(4) Households and individuals, that all the people living in the territory of Indonesia for
one year or more and the center of economic interests in Indonesia. In this sense, including the
Indonesian people who travel abroad for the purpose of tourism, study or medical treatment;
diplomatic staff and their families at the Indonesian embassy or consulate abroad; as well as the
staff of international organizations (which is not the status of diplomats) who served in
Indonesia.
There are some special cases in the determination of the resistance status of an
institutional unit:
(1) Mobile equipment (such as ships, aircraft, satellites, and oil and gas drilling rigs) can
be used to provide services in the territory of several countries or in international waters. The
mobile equipment residency status is not determined by the location of its existence but by
residency companies that operate them. When the equipment is operating in the territorial waters
or international air then the residency follows the company operator.
(2) In the case of an agent, all transactions carried out on behalf of its parent agency in
another country is a transaction parent state, not a state agency. However, all services provided
by the agent to the parent state residency is considered as a transaction agent. For example, ticket
sales transactions by foreign aviation agency offices in Indonesia to the population are
considered as a foreign airline ticket purchases by residents. Meanwhile, remuneration (fee)
obtained from the agency ticket sales transaction is recorded as an acceptance of services by the
population.

CLASSIFICATION STANDARD BALANCE OF PAYMENTS

Structure and classification of standard components of the balance of payments is set in
the BPM5. The standards composed by considering the views of an expert balance of payments
of various countries and the need to harmonize the concepts and definitions used with the
standards and other international statistical classification.
Classification standard balance of payments consists of two main groups of the balance
sheet: current account and capital and financial accounts. Transactions are classified into current
account consists of goods and services , revenue (income) and current transfers. Transactions are
classified into capital account consists of capital transfer transactions (capital transfers) and net
acquisition or disposal of non-renewable non-financial assets (acquisition or disposal of nonproduced, non-financial assets).
Meanwhile, the financial transactions includes direct investment, portfolio investment,
other investment, and foreign exchange reserves (reserve assets). The current account is
generally presented as gross debits and credits, while the capital and financial transactions are
11

presented net debit or credit. Inflows (inflows) of real resources, an increase in financial assets
and liabilities are recorded in the reduction of the discharge; otherwise outflows (outflows) of
real resources, reduction of financial assets, and an increase in liabilities are recorded in the
credit side.

Current Account
The current account measures the revenue and expenditure Indonesia arising from
transactions of goods and services, income and current transfers to non-residents. Transactions in
the current transaction is final, in the sense of the transaction were not associated with previous
transactions or future, as the general financial transactions, for example financial settlement of
the bill or the incidence of investment income.
The current account is divided into four categories:
a) Trade in goods which include export and import of goods and services exports of
goods and services are treated as credit imports of goods and services are treated again as
a debit
b) Services, including payments and receipts for services - legal services, consulting, and
engineering; royalty to patents and intellectual property, insurance premiums, shipping
fees, and tourist spending.
c) Net investment income contains most of the payment and receipt of interest, dividends,
and other income from overseas investment made previously.
d) Net transfer (unilateral transfers) includes payment of "unrequited", such as foreign
aid, reparations, official and private grants, and gifts
The current account includes foreign aid, gifts and other payments between governments
and between private parties. A net transfer is not a trade in goods and services. Or in other words
transaction running summarizes the flow of funds between one particular country with all other
countries as a result of the purchase of goods or services, commission income on financial assets,
or a unilateral transfers (e.g. aid assistance between the intergovernmental and the private
sector). The current account is a measure of broad international trading position. The current
account deficit describes the flow of funds out of a country larger than the funds it receives.
Components of the current account include trade balance and the balance of goods and
service transaction running commonly used to assess the balance of trade. Trade Balance is
simply the difference / difference between exports and imports. If imports are higher than
exports, then there is a trade deficit.

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Conversely, if the exports are higher than imports, what happens is a surplus. While the
balance of services is the trade balance plus the amount of interest payments to foreign investors
and dividends received from investments abroad, as well as revenues and expenses associated
with tourism and other economic transactions.

Table 2.1 shows the standard components of the current account.

Credit

Debit

Goods and services

Goods
General merchandise
Goods for processing
Goods are repaired
Goods acquired at port by means of conveyance
Non-monetary gold
Service
Transportation
Travel
Other
Communication services
Construction service
Insurance services
Financial services
Computer and information services
Royalties and license remuneration
Other business services
Personal services, cultural, and recreation
Government services
Income
Labor compensation
Investment income
Direct investment
Investment portfolio
Other investment
Current transfers
Government
Other sectors
Remittance labor
Other transfer

Capital and Financial

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Capital account includes capital transfers and transactions related non-financial assets are
not renewable (non-produced, non-financial assets). Contains capital transfers ownership transfer
of fixed assets without compensation directly, or transfer of funds related to fixed assets, or
cancellation of financial claims by mutual agreement between the creditor and the debtor (debt
forgiveness). Acquisitions / disposals of non-financial assets do not include transactions related
renewable intangible assets such as copyrights, patents or trademarks, and transaction / purchase
of land by embassies and institutions other extra-territorial. The transaction is not recorded in the
balance of payments.
Acquisitions / disposals of non-financial assets are not renewable creating rights which
can then be used to generate money or other assets. Meanwhile, differ from these transactions,
financial transactions giving the right to receive or obligation to provide cash or other financial
instrument. Financial transactions consist of a transaction relating to the change in ownership of
financial assets and liabilities abroad.
The capital account is used to measure the difference between the sales of assets to a
foreign country with the purchase of the assets abroad. Sales (purchases) of assets are recorded
as a credit (debit) and generate capital inflows (or capital outflows).
The capital account is divided into three categories:
1. Direct Investment which occurs when investors gain some control over the outside
national business.
2. Portfolio investment showed sales and purchases of foreign financial assets such as
stocks, bonds, which do not involve the transfer of control. International portfolio
investments made in equity securities and debt securities.
3. Other investments which include transactions in currency, bank deposits, trade credits,
etc. Investment is very sensitive to changes in relative interest rates between countries
and changes in anticipation of the exchange rate, so that the changes happen will affect
the outside transactions.

Table 2.2 shows the standard components of the capital and financial transactions.
Credit
Capital transactions
Capital transfers
Acquisitions / disposals of non-financial assets are not renewable
Financial transactions
Direct investment
Abroad
Capital stock

Debit

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Earnings reinvested
Other capital
In Indonesia
Capital stock
Earnings reinvested
Other capital
Investment portfolio
Asset
Stock
Debt securities
Obligation
Stock
Debt securities
Derivative financial
Asset
Obligation
Other investment
Asset
Account receivable
Loan
Currency and deposits
Other assets
Obligation
Payables
Loan
Currency and deposits
Other liabilities
Foreign exchange reserves
Monetary gold
Special drawing rights
Reserves at the IMF
Reserves in foreign currency
Other bills

CHAPTER II : INDONESIAS BALANCE OF PAYMENTS PRESENTATION

FORMAT
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NPI format has changed several times. This manual will focus explanation for NPI format
that refers to the BPM5 and began publication in 2004 until today
Table 2.3 Indonesia's Balance of Payments: Summary

Table 2.3 summarizes Indonesia's balance of payments is presented analytically.

Presentation analytically separate transactions to transactions above the line (autonomous
transactions) and transactions below the line (financing transactions), and aims to show the
difference between the transaction of foreign exchange reserves and other components that are
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closely related to other transactions. Foreign exchange reserves and other related components
excluded from financial transactions and shown as a separate component (below the line) used
by monetary authorities to finance other transactions (above the line).
Table 2.4 Indonesias Balance of Payments: Current Account

Goods

17

Services

Income(Primary)

18

Income (Secondary)

Table 2.4 displays the current transaction in more detail. For analytical purposes, exports
and imports of goods are separated between oil and non-oil exports and imports, as well as
interest payments on government debt information and BI shown separately. The two
components of services (transportation and travel) is shown separately

Table 2.5 Indonesias Balance of Payments: Capital and Financial

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Direct Investment

Portfolio Investment

Other Investment

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Table 2.5 provides more detail about the capital and financial transactions, excluding
foreign exchange reserves and other related components. Financial transaction in Table 2.5 is
further broken down by institutional sector in Table 2.6 (the financial transactions of the
government and monetary authorities) and Table 2.7 (private sector financial transactions).

Table 2.6 Indonesias Balance of Payments: Government Sector and the Monetary
Authority Financial Transactions
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Table 2.7 Indonesias Balance of Payments: Private Sector Financial Transaction

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CHAPTER III : DIRECT INVESTMENT

CONCEPTS AND DEFINITIONS

International/Foreign direct investment is an investment made by a resident of a country
(shareholders / direct investor) in an investment company directly (direct investment enterprise)
in other countries for the long term. Shareholders can be individuals, public or private company,
a group of people or companies, government, or other organizations that have 10% or more
shares of an investment company directly. Direct Investment Company is a company
incorporation (incorporated) or non-incorporation (unincorporated) which is 10% or more of its
shares (or equivalent for non-incorporation) is owned by foreign shareholders. The company
consists of: subsidiary (subsidiary, shareholders owning more than 50% of shares), associations
(associate, shareholders have between 10% to 50% of the shares), and branch (branch, the
company non-incorporation).

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Foreign Direct Investment (FDI) is an investing activity to do business in the territory of

the Republic of Indonesia, made by a foreign investor, either by foreign capital and joint venture
with foreign investors.
In Law No. 1 of 1967 affirmed that the definition of foreign investment in Act 1 of 1967
only includes foreign direct investment conducted by or under the provisions of Act 1 of 1967
and used to run companies in Indonesia , in the sense that the owners of capital are directly bear
the risk of such investments.
Definition of foreign capital in Act 1 1967 under section 2 is:
a. foreign payment instruments that are not part of the foreign exchange resources of
Indonesia, with the approval of the Government which are used for financing companies
in Indonesia.
b. tools for companies, including new discoveries are owned by foreigners and materials,
which is inserted from the outside into the territory of Indonesia, during these tools are
not financed from the wealth of Indonesia's foreign exchange.
c. That part of the company based on this Act permitted to be transferred, but used to
finance company in Indonesia.
As for foreign capital in this Act not only in the form of foreign exchange, but also
includes the tools fixtures needed to run the company in Indonesia, inventions belong to the
person / foreign body that is used in the company in Indonesia and the advantages that may be
transferred to abroad but used again in Indonesia.
Direct investment transactions consist of the initial capital investment transactions that
gave rise to the relationship between the direct investor with the company (direct investment as
relationship) and a series of subsequent transactions that occur between them or with other
affiliated companies. In addition, since the relationship of direct investment is established, then
the entire equity and other investments that were previously classified as an investment portfolio
or other investments (linked to the direct investor and its affiliates) was transferred into a direct
investment in the international investment position, by moving the value of equity and other
investments such the components of other changes (other adjustments).
In the case of a direct investment relationship occurs between banks and other financial
intermediaries, transactions that occur between those recorded as direct investment transactions
are limited to equity and permanent debt transactions; other transactions are classified according
to type as portfolio investment, financial derivatives or other investments.
Direct investment relationships can occur directly between direct investors to subsidiaries
or associates, and extends indirectly to the subsidiary of a subsidiary, associate of the subsidiary,

24

and the subsidiary of the association. Direct investment relationships can be seen in the diagram
below:
Figure 9.1 Examples of Direct Investment Relationships

The Company consists of the direct investment enterprise branch, subsidiary, associate,
subsidiary of a subsidiary, associate of the subsidiary, and the subsidiary of the association.
N is an individual, corporation, or other entity that has an ownership interest of at least
10% of capital (having a direct investment relationship) with company A, B, C, D, E, F, K and L
(in bold).
A company is a subsidiary of N;
Company B is a subsidiary of A and therefore is a subsidiary of N;
Company C is an associate of B and therefore an associate of N through its subsidiaries
B;
Company D is the association of N;
Company E is a subsidiary of D and therefore an associate of N;
Company F is an association of N;
Company K is a subsidiary of N;
Company L is a subsidiary of K and is therefore a branch of N;
Company H, J, and G does not have a direct investment relationship with N, because: H
is not a subsidiary or associate of N, thus creating a direct investment relationship; J is a
subsidiary of H but not subsidiaries or associates N because H does not have a direct

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investment relationship with N; G is an association of F but not with N because F is only

an association N.

CLASSIFICATION
The main classification of direct investment is based on the direction of investment.
Direct investment made Indonesian people abroad called direct investment abroad (direct
investment abroad or outward direct investment) and investments made by direct investors
abroad on companies in Indonesia called direct investment in Indonesia (direct investment in
Indonesia [or commonly known as the Foreign Direct investment - FDI] or inward direct
investment).
Criteria for FDI Company, Referring to the provisions contained in the Investment Law
No. 25 In 2007, then known as the "Foreign Investment", must meet several of the following
elements (Art. 1 (3)):
a. An investing activity
b. To conduct business in the territory of the Republic of Indonesia
c. Carried out by a foreign investor,
d. Use of foreign capital and joint venture with a domestic investor.
The form of capital investment can be done in several ways, including (Ps. 5 (3)):
Taking shares when the establishment of Limited Liability Company;
b. Buy stocks; and
c. Perform other means in accordance with the statutory provisions
Based on this understanding, we can conclude that any company in which there is foreign
capital, regardless of the limits on the amount of capital that can be categorized as FDI.
Sectors that can not be entered by FDI, Business sectors closed to foreign investment in
full control are areas that are important for the state and serving the public, according to Article 6
UPMA is as follows:
a. ports
b. production, transmission and distribution of electricity to the public
c. telecommunication

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d. cruise
e. flight
f. water provider
g. public rail
h. atomic power plant
i. mass media.
In each direction of investment, direct investment data can be differentiated according to
the assets and liabilities are presented net though. For direct investment abroad, the data
obligations to affiliated companies abroad (liabilities to affiliated enterprises) shows the inverse
investment (reverse investment) conducted overseas affiliated company in its direct investor
company in Indonesia. As for direct investment in Indonesia, claims data (assets) to direct
investors abroad (claims on direct investors) investment reflects the reversal of the company
direct investment in Indonesia to its direct investor abroad. Reversals of these investments are
rare in the form of equity investments, but very common in other forms of capital investment.
For example, frequent direct investment company in Indonesia to provide accounts receivable to
the company its direct investor abroad. On the other hand, the number of foreign loans received
by the company direct investor in Indonesia from overseas affiliated companies led to a data net
direct investment position abroad Indonesia tend to be negative (net liabilities), but usually is
positive (net assets).
Direct investment data obtained from internal and external Bank Indonesia, namely:
(1) Internal Data Bank Indonesia include: (a) Report of Foreign Exchange for Direct
Investment Abroad transaction data; (b) Commercial Bank Monthly Report for data transactions
and equity capital direct investment position in Indonesia's banking sector; (c) Report
Information System External Debt (whistle) to the data of foreign debt between affiliated
companies; and (d) the results of the survey direct investment in equity capital position data;
(2) BP Migas, to the data of direct investment in the oil and gas sector;
(3) Ministry of State Enterprises, for data privatization;
(4) Asset Management Company (PPA), for data privatization or other state assets, and
(5) The National Committee for the Acceleration of Infrastructure Provision (KKPPI), the
data related to the investment in the infrastructure sector.

27

Investment Realization Progress Quarter I

2015

The value of investment in Quarter I 2015 is direct investment realization

which is done during three months period of report (January-March2015) which is
based on investment realization report by the DDI and FDI companies.
Oil and Gas, Banking, Non-Bank Financial Institution, Insurance, Leasing and
SMEs are excluded
The investment value is in Rp Trillion (T) and for Quarter I 2014 the exchange
rate of US$1=Rp10,500,-based on State Budget 2014, for Quarter IV 2014 the
exchange rate of US$1=Rp11,600,-based on Revised StateBudget2014and for
Quarter I 2015 the exchange rate of US$1=Rp12,500,-based on Revised State
Budget 2015
Investment Realization in Quarter I 2015 : Rp124.6T, an increase around
16.9% from Quarter I of 2014 (Rp106.6T) and increase about 3.5% from Quarter IV
2014 (Rp120.4T)

28

Investment Realization in Quarter I 2015 Compared to

The Same Periodin2014: DDI and FDI; Java and Outside
Java

Economic Corridor

Based on Economic Corridor in Quarter I 2015 period, the highest realization

of DDI and FDI is located in Java Corridor. The further highest realization of
29

DDI is in Sumatera, Kalimantan, Bali and Nusa Tenggara ,Sulawesi, also

Maluku and Papua Corridor. While the further highest realization of FDI is
Kalimantan, Sumatera ,Sulawesi ,Maluku and Papua, also Bali and Nusa
Tenggara Corridor.

Investment Realization in Quarter I 2015: Based on

Sector

Quarter I 2015 Realization : Based on Sector

30

Investment Realization in Quarter I 2015: Based on Location

31

Investment Realization in Quarter I 2015: Based on

Location

Investment Realization in Quarter I 2015: Based on

Country of Origin

32

Investment Realization in Quarter I 2015: Based on

Country of Origin

Indonesian Labor Absorption Progress 2010March

2015: Per Quarter

33

Progress of Investment Realization 2010March

2015: Per Quarter

34

REFERENCE

OECD, 2015, OECD Economic Surveys: Indonesia 2015

Bank Indonesia,2015, Laporan Neraca Pembayaran Indonesia Realisasi
Triwulan II-2015
Bank Indonesia,2015, Laporan Posisi Investasi Internasional Indonesia
Realisasi Triwulan II-2015
BKPM,2015, Domestic and Foreign Direct Investment Realization In Quarter I
(January March) 2015
Bank Indonesia -- Investor Relations Unit, 2015, Recent Economic DevelopmentFebruary 2015
KMPG, 2015, Investing in Indonesia
The World Bank, 2015, Indonesia Economy Quarterly High Expectation March
2015
Agma, F. Syafaat,2015, Pengaruh Foreign Direct Investment Terhadap
Pertumbuhan Ekonomi Indonesia, Jurnal Ilmiah
Salvatore, Dominic. 2007. International Economics. New Jersey: Prentice-Hall
Sukirno, Sadono. 2000. Makroekonomi Modern : perkembangan pemikiran dari
klasik hingga Keynesian baru. Jakarta : Raja Garfindo Pustaka
Todaro, Michael P dan Stephen C Smith. 2004. Pembangunan Ekonomi di Dunia
Ketiga, Edisi Kedelapan. Jakarta : Erlangga

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