Investment Policies and Trends Over Time

This chapter charts how much progress Indonesia has made in reforming its investment climate, encompassing the post-independence era, the New Order regime and the Reformasi period. The Asian economic crisis of 1997/98 damaged the country’s economic and political stability, causing many foreign investors to withdraw their capital, and new foreign investment was slow to come back to the country. The chapter describes the government’s policies to improve its investment climate, including the enactment of the new Investment Law of 2007, while transforming the country into a democratic and decentralised state with a more transparent governance structure. It also demonstrates how FDI flows have responded to policy changes over time and highlights contributions of foreign investment to Indonesia’s economy.