ABSTRACT
This chapter discusses foreign direct investment (FDI) in Indonesia and how it impacts value added. It examines how it affects other aspects that are related to value added, such as tax revenues, wages, and employment. The chapter shows the development of FDI in Indonesia over time and compares it to the development in neighbouring countries and continues with a more detailed look at the industry distribution of FDI, followed by a comparison of foreign and domestic firms in Indonesia. It discusses how FDI contributes to a structural shift of the economy towards high value added activities and how FDI impacts domestic firms. The analysis shows that FDI increases value added in Indonesia, and continues by looking at which actors in the economy benefit from this higher value added. The chapter ends with some concluding remarks and a discussion of the policy implications.
