Impact, partnership, progress: American investment in Indonesia
October-December 2013
By: the American Chamber of Commerce in Indonesia , the US Chamber of Commerce in Washington

The long story of American foreign direct investment in Indonesia began back in 1924, when geologists from Standard Oil of California (now Chevron), were trekking through the jungles of Sumatra Island. Those early explorers, trudging through the hills and forests of modern day Riau province, found the Duri field, one of the biggest oil finds in Indonesia, and began a lasting and positive relationship between US companies and Indonesia.

Today, nearly 100 years later, leading American brands are a familiar sight in the archipelago, big-ticket extractive industry players helped to build the oil and gas and mining industries over several decades, and US manufacturing firms see even greater promise in Indonesia. These are lasting relationships that are poised for significant growth and mutual benefit, but they are sometimes misunderstood and the full extent of US foreign direct investment (FDI) is not well known.

In an effort to grasp the full depth and benefits of US FDI to Indonesia, the American Chamber of Commerce in Indonesia and the US Chamber of Commerce commissioned a comprehensive analysis of the full impact of American FDI on the Indonesian economy — the first study of its kind. The research was carried out by Gadjah Mada University, Paramadina University and Ernst & Young. The study, released on October 3, went beyond existing data to include in-depth interviews with the companies themselves.

We spoke with senior executives from 35 firms with direct investments in Indonesia, including in manufacturing, mining, oil and gas, retail and many other sectors. We asked both for qualitative inputs and quantitative data. We sought insights on the current investment climate, corporate social responsibility activities, challenges that American companies face in Indonesia and issues going forward. We also received hard numbers on both existing and planned investments.

On the basis of those interviews alone, we concluded — conservatively — that from 2004 to 2012, American direct investment in Indonesia totaled $65 billion, including capital expenditures and M&A transactions, making the US potentially the largest investor in the country during that period. This contrasts sharply with most published data that suggests the US is only the fourthlargest investor in the country. We note that more narrowly defined official figures from Bank Indonesia show US FDI for the period at only $7 billion.

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