Tue, 01 Jul 2008
London-based AcelorMittal, the world's largest steelmaker, has been granted two licenses for operations, says M. Lutfi, the head of Indonesia's Investment Coordination Board (BKPM).

He told a luncheon hosted by foreign journalists on Wednesday that the company had been granted licenses for operations in East Java and Batam.

Asked about the rejection of bids by AcelorMittal and other major international steelmakers for a share in PT Krakatau Steel, Lutfi said Dubai Ports had not been allowed to buy US shipping assets. "I do not see this as an Indonesian problem," he said.

Lutfi said Indonesia's main drive was to encourage the development of processing industries for Indonesia's wealth of commodities.

Using cocoa as an example, he said he was concerned that nearly 50% of Indonesia's cocoa production was refined in Singapore. Tax holidays would be offered to investors in the processing sector, he added.

He named Riau, Bengkulu, Central Java, Central Sulawesi, Gorontalo, Maluku and Papua as priority growth areas. In Papua, areas to be developed for plantations would be carefully mapped and investors would be required to replant other damaged areas.

"We are going to do this responsibly. We are signatories to the Kyoto Protocol," he said, stressing that Indonesia had strong competitive advantage in sectors such as plantations and pulp and paper. "To plant an acacia tree, it will take six years to grow. In Finland, it takes 60 years."

Reminding his audience that Indonesia allowed full repatriation of funds, Lutfi also promised to treat investors better. Where there had been red tape would now be a red carpet, he said.

Asked about Indonesia's investment prospects, he said 2009 would be a challenge. Performance had been strong in the first quarter of this year and enough projects were in the pipeline to put on solid growth this year.

Lutfi, asked about low domestic investment figures in the first five months of the year, said some investment listed as foreign was in fact domestic investment channeled through the British Virgin Islands or Mauritius.

Pulp and paper firms Sinar Mas and Raja Garuda Mas invariably invested from outside the country, he said.

Actual domestic investment fell 68.2% to Rp5.9 trillion from Rp18.6 trillion from January to May compared with the same period a year earlier.

Lutfi also stated that the government would be pouring $4 billion into infrastructure developments and public-private partnerships were expected to make a strong contribution to economic growth in this area.



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