Investment may rebound in 3rd quarter<\/p>\n
Rikza Abdullah, Contributor, Jakarta<\/p>\n
Researchers have reported some improvement in business and
\nconsumer confidence in Indonesia but investors are still
\nreluctant to start new businesses due to various problems related
\nto legal and political uncertainties.<\/p>\n
The Danareksa Research Institute, for example, reports that
\nboth the business sentiment index (BSI) and the consumer
\nconfidence index (CCI) have increased to optimistic levels but
\nthe Investment Coordinating Board (BKPM) and agencies related to
\nnew investment projects report declines in the opening of new
\nbusinesses.<\/p>\n
Such reports confirm Bank Indonesia's analysis, saying that
\nthe country's economy is growing but its growth is based
\nprimarily on increases of consumption. However, the central bank
\nsays in a report that investment activities are expected to
\nrebound during the third quarter of this year.<\/p>\n
The research institute said in its latest report that based on
\nits April-May survey of top executives at leading companies in
\nthe country, the BSI rose to 11.3 from 11.2 in the February-March
\nsurvey, reflecting greater confidence in the vigor of the
\neconomic recovery. It attributed the business sentiment
\nimprovement to the optimism of the surveyed chief executive
\nofficers on current sales performance and on expected sales in
\nthe six months ahead.<\/p>\n
They also said that based on its June survey, the CCI
\nincreased by 2.2 percent to 101.4 from 99.3 in May. They
\nexplained that when the CCI was above 100, it was generally
\nindicative of a growing economy underway.<\/p>\n
However, while the business and consumer indices were
\nimproving, the institute reported executive officers' and
\nconsumers' concerns about poor preconditions for the economy's
\nsustained recovery due to the government's poor performance in
\nlaw enforcement.<\/p>\n
It said the business confidence in the government index fell
\nto 104.6 in the April-May period from 106.1 in the previous two
\nmonths, while the consumer confidence in the government index in
\nJuly dropped by 3.3 percent to 115.5 from its June level.<\/p>\n
Such concerns were in line with the BKPM's report that foreign
\ndirect investment approvals during the first half of this year
\ndeclined by 42 percent to US$2.5 billion from $4.3 billion in the
\ncorresponding period of last year, while domestic investment
\napprovals dropped by more than 70 percent to Rp 11.1 trillion
\n(about $1.2 billion) from Rp 39.8 billion.<\/p>\n
In 2001, foreign direct investment approvals declined by 41.45
\npercent to $9.02 billion from $15.42 billion in 2000, while
\ndomestic investment approvals fell 36.5 percent to Rp 58.67
\ntrillion from Rp 92.41 trillion.<\/p>\n
The Nusantara Bonded Zone company (KBN) also reported recently
\nthat foreign exchange investments by companies operating in its
\nindustrial estate in Jakarta declined to $172.5 million during
\nthe first half of this year from $179.93 million in the same
\nperiod last year, while rupiah investments fell to Rp 208 billion
\nfrom Rp 214 billion.<\/p>\n
Colliers Jardine, a property marketing agent, said in its
\nlatest market report that the occupancy rate in Indonesia's
\nindustrial estates declined to 71.4 percent in the latter part of
\n2001 from 75.5 percent in late 2000.<\/p>\n
Willy Koes, Colliers Jardine's manager for the industrial
\nsector, told The Jakarta Post that the occupancy rates were
\ndeclining because many tenants sold their lots in industrial
\nestates to minimize their costs.<\/p>\n
He acknowledged that the sales of new industrial sites were on
\na downward trend, while the leasing of warehouses by logistics
\nand forwarding companies was on an upward trend.<\/p>\n
According to BKPM chairman Theo F. Toemion, the decline in new
\ninvestment was caused by accumulated problems, including legal
\nuncertainty.<\/p>\n
The U.S. embassy said in an economic report that existing and
\npotential investors had cited a number of concerns, including
\npolitical uncertainty, the unknown impact of political and fiscal
\ndecentralization, uneven implementation of economic reform
\ncommitments, the unreliable judicial system, security issues and
\ntreatment of existing investors.<\/p>\n
Djisman Simanjuntak, executive director of the Prasetya Mulia
\nbusiness school, cautioned that Indonesia could not rely on
\nconsumption alone for economic growth for very long, because the
\nconsumption increase, which was accompanied by declines in
\ninvestments, might indicate that consumers had drawn down their
\nfinancial or hard asset deposits for their spending.<\/p>\n
According to Bank Indonesia, the country's economic growth of
\n2.47 percent in the first quarter of this year and about 2.9
\npercent to 3.4 percent in the second quarter was caused mainly by
\nconsumption increases. The consumption, by both the government
\nand the private sector, increased by 9.9 percent in the first
\nquarter and by between 7.6 percent and 8 percent in the second
\nquarter, while investment activities declined by 6.1 percent and
\nby about 2.4 percent to 2.9 percent respectively.<\/p>\n
In spite of the gloomy data, the government seems optimistic
\nabout the future development.<\/p>\n
Bank Indonesia, according to the quarterly report, for
\nexample, expected that investment activities would increase to
\nabout 11.9 percent to 12.4 percent during the third quarter,
\nwhile the consumption would increase to about 5.3 percent to 5.8
\npercent. The economy was likely to grow by about 3.5 percent to 4
\npercent.<\/p>\n
"But investors will remain cautious," Willy said. "We expect
\nthe sales of industrial sites might improve only after 2004, if
\nthe coming general elections run smoothly and fairly."<\/p>",
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