Economic Impact Due to Corona Virus on Foreign Direct Investment in Indonesia

Written by:
Christa Kurnia Alethea
(232017503)

Faculty of Economy and Business

Satya Wacana Christian University
2020
 Table of Content
1. Introduction

1.1 Foreign Direct Investment in Indonesia

1.2 The Corona Virus

2. Analysis and Discussion

2.1 The condition of Indonesia Economy after the Entry of Corona Virus into Indonesia

3. Conclusion

4. References
1. INTRODUCTION

1.1 Foreign Direct Investment in Indonesia

Investment is an activity of buying goods that will be consumed or used directly
to be used in the future to obtain wealth. Foreign direct investment is an investment made
by individuals or companies in one country to another for business purposes. The
characteristic of foreign direct investment is that it establishes effective control or
substantial influence on foreign business decision making. Examples of foreign direct
investment include retail, service, logistics, and manufacturing. Foreign Direct
Investment is very actively utilized in the open market. Foreign direct investment has 3
types, including:
1. Horizontal Foreign Direct Investment
Individuals or companies build the same type of business in other countries
2. Vertical Foreign Direct Investment
Individuals or companies build businesses that are related but different in other countries
3. Conglomerate Foreign Direct Investment
Individuals or companies that build unrelated businesses in other countries.

The development of foreign investment in Indonesia can be said to be quite

interesting. The three sections that have investment value that attracts foreign investors
include manufacturing, mining, and transportation are important sectors that attract more
foreign investors. We can see from the data that realesed by BKPM (Indonesia
Investment Coordinating Board) FDI in Indonesia on 2019. In January until March, the
top three position are occupied by electricity,gas, and water supply with 236 project
which has an investment value of US$ 1.526.373,2. Followed by transportation, storage
and telecommunication industry with 242 projects and has an investment value of US$
1.020.359,0. And the third position is Housing, industrial estate and office with 410
projects and has value of US$ 948.156,0.
In the second quarter of April to June the first position is still occupied by electricity,
gas, and water supply. The project in this area increased into 315 project and has total
value of US$ 1.350.500. Second position occupied by transportation, warehouse, and
telecommunication industry with 349 poject and investment value of US$ 949.800. The
third position is Metal (except Machinery) and Equipment industry with 475 project that
has investment value of US$ 857.900.
There is a little bit changes in positon in October to December 2019. The first
position that have high investment value is Metal (except Machinery) and Equipment
industry with 463 projects and investment value of US$ 1.501,94. Followed in second
place by Electricity, gas, and water supply with 259 projects and US$ 1.490,26. The third
position occupied by Mining industry with 354 projects and US$ 683.680 investment
value.

1.2 The Coronavirus

Coronavirus or COVID-19 is an infectious disease caused by the newly discovered
corona virus. People who are infected with this virus will experience interference
with their breathing, both mild respiratory distress and to be able to the stage of the
moderate group and the person can recover without requiring special care. Elderly
people and people who have diseases such as cardiovascular disease, diabetes,
chronic respiratory diseases, and cancer have more potential for COVID-19 to
develop into a serious disease for them.

This disease has several common symptoms such as fever, fatigue, and cough.
Besides general symptoms, there are several other symptoms, namely shortness of
breath, aches and pains in the body, sore throat. However, there are still very few
people who report symptoms such as diarrhea, nausea or colds. People with mild
symptoms that are declared healthy by the doctor should isolate themselves and
contact the medical team to conduct various health tests and may be referred.

This virus is known to first appear in animal and seafood markets in the city of
Wuhan, China. In the wholesale market for animals and seafood, a variety of wild
animals are sold such as snakes, bats and chickens. This virus allegedly originated
from snakes and spread from animals to humans and then continued from infected
humans to other humans. There are five ways of transmitting the corona virus from
humans to other humans, among others :
1. Transmission from liquids
Water (body fluids) has the potential to carry the virus from patients to others
within a distance of 1 meter.
2. Air transmission
This virus can spread from great distances through the air. This method is the
same as the way the flu virus, SARS, variola, and norovirus is transmitted
from one person to another.
3. Contact Transmission
The virus can be transmitted through direct contact with the skin or the lining
of the lender. Transmission can also be through blood that enters the body or
affects the mucous membranes.
4. Transmission from Animals
People who sell, distribute, and process wild animals that carry the corona
virus can be infected through these contacts.
5. Close contact with patients
Contact with family, people who live in the same house, medical staff, or even
people who have been close to patients who are vulnerable to contracting.
2. Analysis and Discussion
2.1 The condition of Indonesia Economy after the Entry of Corona Virus into Indonesia

Corona virus first entered Indonesia in December 2019. There are two Indonesian
citizens who have been positive for the corona virus, both are mothers and children aged
31 years and 64 years. The child contracted through physical contact he made with a
foreigner from Japan who was working in Malaysia and contracted the corona virus. Both
of these patients have been treated in the isolation room of the Central Infection Hospital
(RSPI) Sulianti Saroso, North Jakarta.
When the corona virus began to emerge, almost all stock exchanges in Asia,
including the Jakarta Composite Index and futures wall street index, were deeply
corrected. Bank Indonesia has noted that the outflow of foreign capital or net outflows
from Indonesia since January 2020 reached 40, 16 trillion (rupiah). A very heavy outflow
occurred in February and March, given the development and the number of Indonesian
citizens suspected of being infected with the corona virus increased. The outflow
recorded in February 2020 was around Rp.28.9 trillion (rupiah) from Government
Securities. And in March 2020 foreign capital outflows amounting to 18 trillion (rupiah)
from Government Securities.
China is the second country that has a realized value of direct investment after
Singapore. Chinese FDI to Indonesia in January - September 2019 increased 81% to
46.39 trillion (rupiah) compared to the same period the previous year. This also had an
impact on the number of projects that increased 28% to 1,619 projects. After the entry of
the Corona virus into Indonesia, Chinese FDI into Indonesia has the potential to decline.
The development of the Covid-19 virus has an impact on the global economy. The
rapid development and spread of the virus causes increased uncertainty and decreases the
performance of global financial markets. In addition, this virus causes pressure on the
eyes of the world, and triggers a reversal of capital to financial assets that are considered
safe.
 According to the Investment Coordinating Board (BKPM), much value can be
drawn from the spread of the Corona virus. The interesting thing is the impact of Corona
on Foreign Direct Investment in Indonesia. Corona virus itself tends to bring negative
sentiment. This negative sentiment has an impact on foreign funds entering Indonesia that
are more long-term in nature and capital outflows tend not to be easy.
Foreign funds that have been spent in the form of land, factories, infrastructure,
machinery, are very difficult to carry or move to other countries. In FDI itself there are
assets that enter the country. The assets referred to are capital, labor, technology,
expertise and goods. However, the liquidity held by FDI itself tends to be rigid, so it is
less likely to return assets that have been spent in forms such as goods, labor and others.
Therefore, FDI is not too quickly affected by the impact of the corona virus.
3. Conclusion
Corona virus which has spread widely in Indonesia clearly has an impact on
various sectors of the Indonesian economy. The virus originating from China which is a
country that plays a role in the global value chain, trade, production and contribution of
tourists to the State of Indonesia. FDI in Indonesia will also be affected due to the spread
of this virus. However, FDI itself has assets such as labor, technology, land, factories,
buildings, machinery that enter the domestic assets and have a level of liquidity that tends
to be rigid. Liquidity which tends to be rigid means that assets in FDI cannot be easily
returned to their home countries or transferred to other investment instruments. So from
these factors, the influence of the Corona virus on FDI in Indonesia tends not to be too
fast.
The government has done various ways to minimize the impact of the corona
virus. One of them is by issuing fiscal policies added with real policies such as the
Omnibus Law Cipta Karya. In the real sector, the government has contributed positive
confidence momentum, both in the industrial sector, trade, agriculture, mining, fisheries,
to human resources in the education sector.
 References
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