Mon, 26 Jun 2006

BKPM defends validity of its foreign investment data

The Jakarta Post, Jakarta

The Investment Coordinating Board (BKPM) has defended the validity of its data on realized foreign investment, saying the figure is based on the total spending on implementation of foreign investment projects.

BKPM statistics staff chief Tanzili said Saturday that the data on the value of Foreign Direct Investment (FDI) issued by Bank Indonesia (BI) and the Investment Coordinating Board (BKPM) had significant disparities because the two institutions use different methods in the data collection and calculation processes.

The central bank's calculation of FDI inflows is based only on the funds transferred by foreign investors. BKPM bases its calculation on all the spending for their investment projects, either from overseas sources or local financing such as loans from local banks or money provided by local partners, he said.

"Bank Indonesia (BI) is just calculating equity inflows entering Indonesia, while BKPM is calculating all the money invested, including from domestic loans," Tanzili told The Jakarta Post.

He said foreign investment projects involve local investors as minority shareholders, who besides providing equity also help secure additional financing from local lenders.

"This is why our figure is larger than that provided by Bank Indonesia and its FDI inflows," he said.

The latest report issued by the World Bank indicated a US$2 billion difference between BI and BKPM figures regarding total FDI inflows in 2005. BI data reported total FDI inflows of $6.9 billion, whereas BKPM data showed a realized foreign investment of $8.9 billion.

BKPM's number is larger even though it excludes investment in mining, oil and gas, financial services, and the capital market, which are overseen by other government institutions.

Tanzili said the discrepancy is a normal given the two institutions' different focuses.

"BI is concerned with how many dollars are entering this country, while BKPM focuses on the implementation," he said, adding that the different points of view would always lead to different figures.

"We have discussed the discrepancy with BI, but that is the way it is. If you compare these figures with industry or trade ministry figures, they will also be different, because they also have their own focuses," he said.

Economic observers have often complained about the data disparity. Tanzili, however, said that the difference should not be a cause for concern. "If they want FDI figures based on equity inflows, they must read BI's report, but for implementation, they can rely on our data," he said.

The World Bank had assumed that differences in the way BI and BKPM compile investment statistics might explain the disparity.

In its report, the World Bank said that BKPM's data, which was compiled only from its issuance of permanent business licenses (IUT), might be not be as meaningful as BI's multi-source data.

The World Bank also concluded the large FDI figure in 2005 might result from BKPM issuing many IUTs that year, as a result of BKPM's decision to extend the field visits required for an IUT.

Tanzili said even though BKPM compiled data only from the issuance of IUTs, the figure in 2005 was reasonable, because many projects delayed by financial and operational problems were ultimately realized in 2005.

He added that BKPM categorized non-realized foreign investment as approved foreign investment.

In its latest report, BKPM says that realized foreign investment increased by 5.1 percent to 3.13 billion involving 377 projects between January and May this year. That's compared to $2.98 billion involving 321 projects in the same period of 2005.

However, the value of approved foreign investment during the same period dropped to $3.66 billion from $5.47 billion.(09)