Indonesia has lost out to Vietnam in the regional competition to attract foreign direct investment (FDI
) amid a slowdown in Southeast Asia’s largest economy, Indonesia’s Minister of Trade Thomas Lembong was quoted by Reuters as saying.
“We have to admit there is a regional trend where Vietnam... has worked hard in the past eight to nine years to be an investment magnet and it is reaping the results now. Indonesia must catch up,” Lembong told reporters after a cabinet meeting.
Total direct investment in Indonesia from both foreign and local investors will likely grow 12%-14% year-on-year in 2016, excluding investment in banking, oil and gas sectors. That compares with 17.8% growth in such investment in 2015.
Last year, FDI into Indonesia was $29.3 billion, while locals invested $13.58 billion, according to data of the Investment Coordinating Board.
Meanwhile, FDI pledges for fresh and operational projects in Vietnam reached $14.37 billion in the first eight months of this year, rising 7.7% from the same period of 2015, statistics of the Ministry of Planning and Investment showed.
Foreign investment flows into the country last year touched $22.76 billion, representing a 12.5% year-on-year increase.
A recent study of fDi Intelligence under Financial Times put Vietnam at the top among 14 emerging economies in term of greenfield FDI for the second straight year.
Vietnam scored 6.45 in the index, meaning that the country is attracting more than six times the amount of greenfield FDI that might be expected given the size of its economy.
With the score, Vietnam stayed far ahead of next placed Hungary and Romania, and its regional competitors Malaysia, Thailand and Indonesia.
Vietnam has emerged as an increasingly attractive for foreign investment thanks to its outperforming economic growth, the fast growing middle class and the signing of major trade agreements. The government is striving to cut red tape to make the investment climate more appealing.