Foreign Direct Investment and Corruption: Is Indonesia Still a Risky Market?

Abstract

Foreign Direct Investment (FDI) is vital for Indonesia’s economic growth, yet corruption remains a key concern for investors. This paper evaluates the extent to which corruption affects Indonesia’s investment climate and assesses recent reforms aimed at improving transparency and regulatory efficiency. Drawing on investment data, surveys of multinational corporations, and governance indices, the study examines corruption-related risks such as bribery, bureaucratic delays, and informal payments that investors encounter. Findings indicate that while progress has been made, particularly through digitalization and regulatory simplification, corruption still poses significant obstacles in some sectors and regions. The paper discusses the implications of corruption perceptions for Indonesia’s competitiveness in the global market and offers policy recommendations to strengthen anti-corruption enforcement and investor protections. This research contributes to the international debate on FDI and corruption by providing a nuanced understanding of challenges and reforms in a major emerging market.