Sustainable Development Impacts of Investment Incentives: A Case Study of the Chemical Industry in Indonesia

This case study examines the role of investment incentives in attracting foreign direct investment (FDI) to Indonesia's chemical industry and evaluates the resulting social and environmental impacts, specifically in Banten province.

• Investment incentives were not the primary driver for chemical companies deciding to invest in Indonesia; the size of the Indonesian market was more significant, although investors valued incentives like reduced import duties for cost reduction.
• FDI in the chemical and pharmaceutical industry represented 16 percent of total FDI in 2007, making it the second largest sector after transportation services, warehousing, and telecommunications, with primary investments coming from South Korea, Japan, the UK, and Singapore.
• The chemical industry is identified as the primary polluter in Indonesia. In Banten province, foreign companies generally showed better environmental performance than domestic ones, though residents reported air and noise pollution within tolerable limits.
• The chemical industry offers fewer employment opportunities compared to the electronics, machinery, metal, and textile industries. In Banten, local residents face limited direct employment due to low education levels, though they benefit from indirect jobs and infrastructure improvements.

APA

Wijaya,, S. A. L. I. R. S. (2009). Sustainable Development Impacts of Investment Incentives: A Case Study of the Chemical Industry in Indonesia. International Institute for Sustainable Development. https://www.iisd.org/publications/report/sustainable-development-impacts-investment-incentives-case-study-chemical

Chicago

Wijaya,, Sri Adiningsih,Murti Lestari,A. Ika Rahutami,Awang Susatya. Sustainable Development Impacts of Investment Incentives: A Case Study of the Chemical Industry in Indonesia. International Institute for Sustainable Development, 2009. https://www.iisd.org/publications/report/sustainable-development-impacts-investment-incentives-case-study-chemical.

Wikipedia

{{cite report |last1=Wijaya, |first1=Sri Adiningsih,Murti Lestari,A. Ika Rahutami,Awang Susatya |title=Sustainable Development Impacts of Investment Incentives: A Case Study of the Chemical Industry in Indonesia |publisher=International Institute for Sustainable Development |date=1 April 2009 |url=https://www.iisd.org/publications/report/sustainable-development-impacts-investment-incentives-case-study-chemical |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{wijaya2009sustainable, author = {Wijaya,, Sri Adiningsih,Murti Lestari,A. Ika Rahutami,Awang Susatya}, title = {{Sustainable Development Impacts of Investment Incentives: A Case Study of the Chemical Industry in Indonesia}}, institution = {International Institute for Sustainable Development}, year = {2009}, month = apr, url = {https://www.iisd.org/publications/report/sustainable-development-impacts-investment-incentives-case-study-chemical}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }