Foreign direct investment (FDI) into Indonesia surged by 18.55% year-on-year in the third quarter of 2024, reaching 232.65 trillion rupiah (US$14.94 billion), according to data released by the country’s investment ministry on Tuesday. The strong growth in FDI reflects increasing investor confidence in Southeast Asia’s largest economy, particularly in sectors linked to the electric vehicle (EV) supply chain.
This third-quarter rise follows a 16.6% annual increase in the second quarter, signaling sustained momentum in foreign investments. Notably, the figures exclude investments in the financial and oil and gas sectors, further underscoring the diversification of foreign capital inflows into Indonesia’s economy.
Key to this investment boom has been Indonesia’s 2020 ban on nickel ore exports, a policy designed to attract investors to the country’s mining and metal refining sectors. The strategy has successfully positioned Indonesia as a crucial player in the global EV supply chain, with nickel being a vital component in EV batteries. In the July-September period, the base metal industry attracted US$3.03 billion in investments, while the transportation, warehousing, and telecommunications sectors garnered US$2.02 billion, and mining drew US$1.56 billion.
Investment Minister Rosan Roeslani credited the government’s “downstreaming” program—focused on adding value to Indonesia’s rich natural resources—as a key driver of FDI. “The main contributors of FDI came from the downstreaming programme,” Roeslani said, referencing the country’s focus on processing raw materials domestically.
Among the top sources of FDI were Singapore, Hong Kong, and China, demonstrating strong regional interest in Indonesia’s burgeoning industrial sectors. When combined with domestic investment, total direct investment in the third quarter hit 431.48 trillion rupiah, reinforcing Indonesia’s role as a key investment destination.
Notable investments in the period included the completion of major copper smelting projects by Freeport-McMoRan’s Indonesian subsidiary and local miner Amman Mineral Internasional. Additionally, significant future FDI is anticipated in the EV battery manufacturing space. South Korean and Chinese firms are expected to launch EV battery-related projects soon, though the ministry did not disclose specific names.
Further bolstering Indonesia’s EV ambitions, South Korea’s LG Energy Solution is set to open its cathode factory in Central Java later this year, while China’s Zhejiang Huayou Cobalt will begin battery precursor production in North Maluku next year, according to the ministry.
Global automakers are also keen to tap into Indonesia’s growing EV market. Carmakers BYD and Stellantis have both secured tax breaks for their planned EV production facilities in the country, although no specific timeline has been provided for these projects.
With its rich natural resources and favorable investment policies, Indonesia is rapidly emerging as a key hub in the global EV supply chain, attracting billions in foreign capital and setting the stage for continued growth in the years to come.
