Jakarta. Two economists from the University of Indonesia (UI) have offered sharply different assessments of the country’s investment climate, with Fithra Faisal Hastiadi challenging a senior colleague’s claim that conditions are the worst he has ever observed.

Fithra, a lecturer at the university’s Faculty of Economics and Business, said the latest indicators do not suggest a systemic loss of investor confidence, disputing an assessment by Mohamad Ikhsan, chairman of the faculty’s Council of Professors, who gave Indonesia’s investment climate a score of 2 out of 10.

Fithra said he respected Ikhsan’s criticism, particularly over legal certainty, regulatory quality, and policy consistency. However, he argued that describing the investment climate as the “worst” requires equally compelling empirical evidence.

“The stronger the conclusion, the stronger the empirical evidence that should support it,” Fithra said in a statement over the weekend.

He pointed to investment realization of Rp 1,931.2 trillion ($109 billion) in 2025, up 12.7% year-on-year. Investment reached Rp 1,010.6 trillion in the first half of 2026, representing another 7.2% increase from a year earlier.

While growth slowed from 13.6% in the first half of 2025, Fithra argued that moderation should not be confused with contraction.

“Our investment base is getting larger, yet realization continues to record positive growth,” he said.

Foreign Investment Accelerates
Fithra highlighted foreign direct investment (FDI) as particularly significant. FDI reached Rp 250 trillion in the first quarter of 2026, up around 8.5% year-on-year, before rising to Rp 257.7 trillion in the second quarter, a 27.4% increase from a year earlier.

Cumulatively, FDI reached Rp 507.6 trillion in the first half of 2026, up 17.3% from Rp 432.6 trillion in the same period last year.

“So, we are not seeing foreign investment flows drying up. On the contrary, growth has accelerated quite sharply,” Fithra said.

He argued that FDI is particularly important as an indicator because it represents a long-term commitment of capital.

When investors build factories, smelters, data centers, or industrial estates, purchase machinery, or establish supply chains, they are committing capital based on their expectations for the economy over many years, he said.

“Ultimately, investors vote not with words, but with capital commitments,” Fithra said.

Gross fixed capital formation (GFCF) data showed a similar trend, growing 5.96% year-on-year in the first quarter of 2026 before accelerating to around 6.87% in the second quarter.

Fithra argued that if Indonesia’s investment climate were genuinely at its worst, the data should show a consistent pattern of falling FDI, companies holding back expansion, weakening capital goods purchases, and a sharp slowdown or contraction in GFCF.

“But the data from the first half of 2026 does not show that pattern,” he said.

‘An Alarm Is Different from a Diagnosis’
Fithra nevertheless acknowledged that Indonesia faces significant challenges in improving its investment environment, including regulatory certainty, policy consistency, transparency, institutional quality, bureaucracy, a level playing field, and policy predictability.

He also cautioned that investment performance should not be judged solely by the amount of capital flowing into the country. The quality of investment -- including whether it is productive, technology-intensive, creates quality jobs, facilitates knowledge transfer, and improves productivity -- is equally important.

“We should listen to strong criticism as an alarm to ensure that reforms do not stop. But for me, an alarm is different from a diagnosis,” Fithra said.

A day earlier, Ikhsan gave Indonesia’s investment climate a score of just 2 out of 10 during a forum in Tangerang.

“To be honest with all of you, based on my observations, this is the worst condition I have seen throughout the period I have been observing it,” Ikhsan said.

He argued that Indonesia has enormous economic potential but that the gap between that potential and actual performance is widening.

Ikhsan also highlighted concerns over trust and credibility, the transparency and reliability of data, and the importance of maintaining fair competition.

Fithra did not dismiss those concerns but argued that institutional shortcomings should be distinguished from an assessment of the actual state of investment.

“Perceptions deserve to be heard, and institutions must continue to improve. But the data must also be given a chance to speak,” Fithra said.

“Is the investment climate really at its worst? For such a strong conclusion, I think the latest figures actually tell the opposite story.”

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