Economic Recovery in Indonesia: The Challenge of Combining FDI and Regional Development

Indonesia has been severely hurt by the recent economic crisis, which has been accompanied by social tensions. Still, there are reasons to be optimistic about Indonesia's future. The economic crisis may have bottomed out and the difficult transition to democracy has started. For a sustainable long-term recovery, it is essential that Indonesia is able to attract FDI inflows, and manages to achieve a reasonably equal spatial development of growth. Unfortunately, there is a possible contradiction between FDI and even regional development since FDI tends to locate in concentrated clusters. This paper discusses some requirements for a long-term recovery of Indonesia, which special focus on FDI and an even spatial development.