Longer-term investment inflows into Indonesia are replacing riskier short-term investments, a condition showing more confidence and more favorable to economic growth.

According to The Jakarta Post, Bank of Indonesia (BI) data shows foreign direct investment (FDI) increased from US$2.48 to $2.9 billion in the first quarter of 2011, a 17% rise. At the same time, the trend was reversed in shorter-term foreign portfolio investment (FPI) went from $6.1 billion to $3.56 billion.

BI spokesman Difi A. Johansyah said investment loans rose 29% on a year-on-year basis as of May 2011, and would build Indonesia’s economic capacity for growth without negative impacts, like economic overheating. Increased production capacity would ensure ample supply to meet demand, mitigating inflation.

The trend will move even further towards FDI and longer-term investments should Indonesia achieve investment-grade rating from Moody’s, Fitch Ratings and Standard & Poor’s, enabling influxes from large foreign institutional investors. Indonesia’s central bank also recently revised the country’s growth forecast for 2011 from 6.4% to 6.8% on improved prospects for investment and exports.

source & article: The Jakarta Post