Australian firms urged to invest in Indonesia

Australian firms urged to invest in Indonesia

CANBERRA (Dow Jones): Indonesian Special Trade Envoy James
Riady on Monday urged Australian companies to invest in Indonesia
for the medium- and longer-term to gain a "foothold" in the
market ahead of its economic recovery.

James, on a week-long visit to Australia to promote investment
in Indonesia through meetings with local business and political
leaders, said the Indonesian economy has a bright future beyond
two to three years.

The Indonesian envoy hopes his visit will spark greater co-
operation between the two countries, and that Australia can
assist Indonesia in its areas of expertise.

"Australia is very strong in agriculture, Indonesia needs help
in agriculture, Australia has had great success in privatization
and how to make the make the government more efficient and
effective, Indonesia needs that," the Australian-educated James
told reporters here.

"Australia could provide assistance in educational areas...and
how to restructure Indonesian foreign sector debt, and the
banking reformation and recapitalization, Australian banks can
also play a part."

James, who is one of Indonesian President B.J. Habibie's seven
special business envoys, said Indonesia is a relatively low-cost
location for investment, and has the necessary infrastructure in
place.

"The rupiah has devalued by the highest percentage amount of
Asian countries, Indonesia is resource rich, it's a large market,
Indonesian labor costs, even accounting for expected increases in
wages, will still be about the most competitive in Asia, and the
labor quality is also quite good," he said.

"After the economic crisis, Indonesia is a substantial market
that nobody can afford to ignore."

On Monday, the rupiah is at ,800 to the U.S. dollar, compared
with around 2,500 more than a year ago.

Investment

An Indonesian official at the news conference noted Australian
applications for investment in Indonesia between January and
August of this year totaled just US$63 million of total
investment applications of US$11.78 billion.

"Australia needs to spend more," said the official.
However, James conceded the Indonesian economy will struggle for
the next two to three years.

Inflation will be around 80 percent this year, gross domestic
product will contract about 15 percent, the total number of
people unemployed will rise to 20 million, and there will be
around 50 million people without income, he said.

Monthly inflation for September dropped to 3.75 percent from
more than 6 percent in August.

In all, the economy contracted 13.6 percent in the first nine
months of 1998, compared with a year earlier, the Indonesian
central statistics bureau said.

James said the key factor in addressing these problems is
resolving the large foreign private sector debt.

Private sector debt is around US$85 billion, of which around
50 percent is attributable to foreign companies based in
Indonesia, he said.

"How soon we can sort out private sector debt...will determine
how long the recession is going to be in Indonesia. We're
confident the creditors and the debtors are working through the
various programs," James said.

When asked what message he will convey to Australia's Prime
Minister John Howard at a meeting scheduled for later this week,
James said he will thank Australian people for their support
since the start of the economic crisis.

The envoy noted the Australian government's role in
negotiations with the International Monetary Fund over its
financial rescue package for Indonesia, to which Australia has
pledged up to US$1 billion.