Foreign investors' concern turns to unrest in Aceh<\/p>\n
JAKARTA (JP): Political uncertainty in the troubled province
\nof Aceh has become a major concern for most foreign investors in
\nIndonesia, according to a Singapore-based economist.<\/p>\n
Mangal Goswami of the Economic Research Group Asia Pacific
\nsaid here on Monday the political problem in the oil-rich
\nprovince would further reduce foreign investor confidence in the
\ncountry's economy.<\/p>\n
"They take this threat seriously," Goswami said in reference
\nto Aceh's mounting calls for a referendum, which could lead to
\nthe separation of the province from Indonesia.<\/p>\n
Speaking at the Cash Management and E-Commerce seminar held by
\nABN AMRO Bank, Goswami said the key to restoring investor
\nconfidence would depend on President Abdurrahman Wahid's handling
\nof the Aceh issue.<\/p>\n
Foreign investors would like to see the government use
\npeaceful means in dealing with the Acehnese, Goswami said, adding
\nthat opening up a dialog was crucial for positive developments.<\/p>\n
He said foreign investors feared that if the Aceh problem
\ncould not be resolved properly it would spark further social
\ninstability in Indonesia.<\/p>\n
Goswami did not specify whether foreign investors expected
\nIndonesia to disintegrate should Aceh separate from Jakarta,
\nbut added that "economic stability hinges on political and social
\nstability".<\/p>\n
He said that even before the Aceh issue investors had delayed
\nchanneling funds into Indonesia.<\/p>\n
Goswami said investor caution was related to a wait-and-see
\nattitude on the performance of the newly established government.<\/p>\n
He said the fundamental soundness of Indonesia's economy was
\nof even greater importance than the Aceh issue.<\/p>\n
He said investors were generally upbeat about Indonesia's
\nprospects and had expressed their intention of returning to the
\ncountry.<\/p>\n
Goswami said investor confidence had been boosted by
\ndiminished political risks and the election of a President who
\nhad a grasp of Indonesia's key problems.<\/p>\n
"Investors have switched the question from whether they would
\ninvest in Indonesia to when they would invest," he said.<\/p>\n
Goswami projected that starting from next year foreign
\ninvestments would gradually pick up, but that any improvement was
\ndependent on resolution of the Aceh issue.<\/p>\n
In regard to Indonesia's overall economic outlook, he said
\nthat economic recovery would largely depend on the combination of
\nforeign direct investment and restructuring of the banking
\nsector.<\/p>\n
He said investors would place their funds in export-oriented
\nsectors, and cited the textile and shoe industry as lucrative
\nopportunities.<\/p>\n
He said the agriculture sector, which has reaped huge profits
\nduring the economic crisis, did not hold huge appeal for foreign
\ninvestors.<\/p>\n
Goswami was optimistic that exports would rise sharply, not
\nonly because of foreign investment flows but also due to a
\nstronger demand for Indonesian products.<\/p>\n
In the financial sector, he predicted banking interest rates
\nto further decline to about 11 percent by early next year, from
\nthe current 13 percent.<\/p>\n
"It's normal that interest rates drop sharply after a crisis,"
\nhe said, but added that he expected interest rates to slowly
\nclimb after bottoming out at 11 percent or 12 percent.<\/p>\n
He projected that Indonesia's interest rates would then attain
\ntheir pre-crisis level.<\/p>\n
Separately, ABN AMRO Bank country manager Pieter Van den Akker
\nsaid foreign investment was vital in reviving Indonesia's
\neconomy.<\/p>\n
Akker declined to confirm talks on ABN AMRO's intention to
\nacquire several Indonesian banks.<\/p>\n
He said Indonesia's banking crisis was unprecedented in
\nhistory, describing the cost for restructuring the banking sector
\nas "phenomenal".<\/p>\n
He said bank's loan portfolios had generally been negative but
\nthat he expected the situation to change so that such loans would
\nstart to pay interest again.<\/p>\n
ABN AMRO's role in attracting foreign investment would be as a
\nsource of information to investors regarding Indonesia's economy,
\nhe said, adding that ABN AMRO was the oldest foreign bank in
\nIndonesia.<\/p>\n
Akker said that with its global network, the bank would also
\nprovide trade financing to boost Indonesian exports. (03)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/foreign-investors-concern-turns-to-unrest-in-aceh-1447893297",
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