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Jakarta Investment Outlook 2025

Date:
25 November 2024
Category:
News
Topics:
InvestmentEconomic

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Jakarta, 25 November 2024: Dr Lili Yan Ing, Secretary General of the International Economic Association and Senior Economist at ERIA, shared her insights on the Indonesia Economic Outlook at the Jakarta Investment Outlook 2025 event, hosted by the Jakarta Investment Centre of the Provincial Government of DKI Jakarta.

‘By the end of 2024, ASEAN will become the fourth-largest economy globally, with a GDP of $4.13 trillion,’ Dr Ing stated, emphasising the region’s resilience amid global uncertainties. Other panellists, Samuel Houten, Foreign Direct Investment Advisor at UOB Indonesia, and Rama Magrahana, Head of the Strategic Planning and Development Funding Division at BAPPEDA DKI Jakarta, echoed Dr Ing’s optimism.

Dr Ing highlighted ASEAN’s growing role as a global economic force. ’In 2023, ASEAN accounted for 7.4% of global trade, 4.7% of manufacturing value added, and attracted 17% of global FDI inflows,’ she noted. ASEAN’s strategic importance is further underscored by its status as a leading trading partner for China, Japan, the Republic of Korea, and the United States.

Despite these achievements, Dr Ing acknowledged persistent challenges. She pointed to geopolitical tensions, particularly the US–China trade and technology rivalry, and the rise in protectionist measures, which continue to disrupt global supply chains. Domestically, ASEAN faces hurdles in boosting manufacturing value added, as 30% of its exports remain resource-intensive.

However, ASEAN’s progress in advanced industries offers hope. Dr Ing highlighted the growth of semiconductor exports, which increased from $52 billion in 2017 to $165 billion in 2022, demonstrating the region's potential in this high-value sector. She also emphasised the promise of the digital economy. With 70% of ASEAN’s 679 million people online, the digital economy was valued at $259 billion in 2023 and is projected to reach $1 trillion by 2030, driven by a tech-savvy population.

On foreign direct investment (FDI), Dr Ing emphasised both opportunities and challenges. Indonesia’s FDI-to-GDP ratio stands at 1.61%, significantly lower than regional leaders like Singapore at 34.95%. ’This disparity highlights the urgent need for Indonesia to reform its investment policies and foster a more conducive environment for foreign investors,’ she stated.

Dr Ing also discussed Indonesia’s Incremental Capital-Output Ratio (ICOR) as a measure of investment efficiency. Indonesia’s ICOR is 15.6, indicating moderate efficiency compared to Thailand (11.4) and China (12.6). ’Lowering ICOR through strategic investments in infrastructure, technology, and human capital is vital to enhancing Indonesia’s productivity and economic growth,’ she stressed. She called for regulatory simplification and fiscal incentives to attract high-quality investments and support sustainable development.

Looking ahead, Dr Ing emphasised the importance of proactive policymaking. ’We must ensure macroeconomic stability, streamline regulations, and create an environment conducive to investment,’ she said. Additionally, she underlined the need for investment in human capital. ’Education, healthcare, and digital literacy will be the key drivers of productivity and long-term growth,’ she concluded.

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