The challenge of combining FDI and regional development in Indonesia

Indonesia has been severely hurt by the recent economic crisis, which has been accompanied by social tensions. For a sustainable long-term recovery, it is essential that Indonesia attracts FDI inflows, and manages to achieve a reasonably equal spatial development. FDI is important since other capital funds are scarce and an equal spatial development is important to avoid social tensions. However, there is a possible contradiction between FDI and even regional development since FDI tends to locate in clusters. This article discusses FDI and an even spatial development in Indonesia, and offers some policy suggestions for a sustainable long-term recovery.