Novia D. Rulistia, The Jakarta Post, Jakarta
Realized investment in Indonesia grew 56.2 percent in the year's first half compared to in the same period last year, with robust foreign investments offsetting a domestic decline, the Investment Coordinating Board (BKPM) says.
Realized investment in the first half of the year reached US$11.32 billion from $7.25 billion in the same period last year, BKPM chairman Muhammad Lutfi said Monday.
Foreign investment in the period reached $10.3 billion, a 153.2 percent increase from $4.1 billion a year earlier, countering a 70 percent decrease in domestic investment to $940 million from $3.15 trillion.
"The drop (in domestic investment) was a result of the fuel price increases, and also because many domestic investors teamed up with foreign investors to open or restart businesses," Lutfi said after a hearing with the House of Representatives Commission VI overseeing trade, industry and investment affairs.
He said the domestic investment slowdown would continue toward the end of the year as investors continued to adjust to increased fuel prices, but he was optimistic the situation would improve in 2009.
The government increased domestic fuel prices in May by 28.7 percent on average to cap a ballooning fuel subsidy amid high global crude oil prices.
Lutfi said the telecommunications sector received the bulk of the foreign investment in the first half of the year, followed by the electronic, transportation and trade and services sectors.
Domestic investors primarily injected funds into food-related sectors, as well as electronics, trade and services and pulp and paper sectors.
Mauritius remained Indonesia's largest foreign investor during the period, followed by Japan, Singapore, Malaysia and Germany.
Commenting on the country's power deficit, Lutfi said it was unlikely the crisis would effect foreign investment in the country.
"The foreign investors are not only attracted by Indonesia's infrastructure, they also see the country as a potential market with its huge population," he said, adding that power crises were also plaguing the United States, China and Vietnam.
"But it's very likely foreign investors will pull out of this country if the power crisis persists," he said.
The government last week issued a regulation forcing manufacturers to reschedule operating hours to offset periods of peak loads on power grids. The regulation obliges companies to move two working days per month to Saturday and Sunday. The regulation will be enacted from July 21 until the end of 2009.
Lutfi also said overseas investors would likely not be put off by the prospect of next year's general election.