FDIs in Asia

According to a report set to be released at the upcoming Dubai Annual Investment Meeting undertaken by the Abu Dhabi Global Market (ADGM), within West Asia, figures for 2015 showed that the most FDI was received by Turkey and then the UAE.  Regarding this, vis-à-vis the UAE, CEO of the ADGM’s Financial Services Regulatory Services, Richard Teng said:

“ADGM is pleased to be part of the AIM 2017 that brings together local and international industry leaders, policy makers, and the investment community to share best practices, discuss industry developments and establish new partnerships. FDI is a key contributor of UAE’s  economic and investment growth.  As an international financial centre, ADGM works actively on efforts and initiatives that enhance UAE’s and Abu Dhabi’s strength as an attractive financial and investment destination for local and international entities.”

Meanwhile in Indonesia FDI figures were not as promising.    There was a significant deceleration in Q4 16.  That could lead to a thorn in the side at efforts being made at bolstering the growth of the economic expansion in the region.  It has been suggested that this might be the backlash of Jakarta’s political tensions due to this month’s regionals and Trump’s presidency and thus are concerned about prospects for emerging markets. Still there was a 2.1 percent increase in FDI in Q4 16 vis-à-vis Q4 15 but that was the smallest increase in the last five years.

Vietnam had better figures.  It encountered a 9 percent FDI increase in 2016, resulting in a record US$15.8 billion for that time frame.  And from the end of 2015, the manufacturing industry encountered a staggering 13.61 percent increase.

So overall FDI in the region is not faring too badly but political climates have to – as always – be handled.

Putting Indonesia on the Map

IndonesiaIndonesia has not traditionally been the go-to place for US investments. It’s rather usually been places like China Americans have flocked to when seeking a place in Asia in which to put their money. Indeed, as was well put by Sham Gad, in an article in Investopedia, entitled, ‘Investing in China,’ US investors into the region get “the advantage of a U.S.-regulated, GAAP-adhering public company along with the profit growth potential coming from China.”

Now though Indonesia might be coming into its own. Easing more investment regulations as in its most recent business announcement, this will boost the rupiah and have the potential to encourage somewhat recalcitrant investors to put their money into the region.

One of these procedures would actually let foreign investors “park their profits onshore” which could assist in boosting a currency that has dropped nearly 19 percent against the dollar this year. This could lead to investors getting returns of anywhere between one and two percent points higher than what they have in Singaporian banks, which is certainly a much more attractive option.

The fact that Obama visited Indonesia twice in his first term also can’t hurt the situation. As Senior VP for Asia at the US Chamber of Commerce, Tami Overby recently said, there will be more regional competition for foreign investment when the Trans-Pacific Partnership trade deal is ratified and takes effect, most likely within the next two years.

Indonesia: Fighting for More FDI

taxIn an effort to expand FDI in the region, Indonesia will increase its tax holiday from 10 years to a maximum of 15 years for investments that fall into one of three categories: those of IDR 1 trillion (US$76 million) plus; labor-intensive investments, and investments that are made into the economically-poorer region of eastern Indonesia. It will also be applied to those categories viewed as “pioneer” like: base metals, communications equipment industry, machinery, oil refinery, and renewable energy.

Interestingly at the end of the first quarter of 2015, there was a notable increase in investment in Indonesia. It hit a record since when Joko Widodo was elected President, indicative of how he is succeeding in “revitalizing Southeast Asia’s biggest economy.” Indeed, figures showed that total investment went up 16.9 percent, resulting in a quarterly record of 124.6 trillion rupiah ($9.6 billion) during that time frame.