BKPM expects no sharp falls in foreign direct investment
BKPM expects no sharp falls in foreign direct investment
JAKARTA (JP): The Investment Coordinating Board (BKPM) expects
no significant drop in foreign direct investment this year,
despite a sharp fall in the last four months.
BKPM deputy chairman Sugihono Kadarisman said on Friday
foreign investment was likely to stay unchanged at about the same
figure as last year -- US$13.6 billion.
He was optimistic foreign investment would pick up in the
coming months, given the improvement in Indonesia's economy and
the better than expected outlook for the general elections which
will be held on June 7.
Electoral campaigns, which started two weeks ago, have run
smoothly, with no reports of major unrest as earlier feared.
Kadarisman said many foreign investors had expressed an
interest in expanding their business in Indonesia, but that they
preferred to wait until the country's political conditions
stabilized.
"Despite the slow investment inflow in the first four months
of this year, we are optimistic that we will see an influx in
foreign investment approvals in the six-month period after the
general election," he said.
He said foreign direct investment approvals during the first
four months of this year amounted to 279 projects worth $935
million, down 80 percent from the same period last year.
He said most of the projects were in the agribusiness and
fishery fields.
"They realize that exports of agriculture commodities have
great potential and that Indonesia is one of the best places for
such investment."
Sugihono said the general election, the first democratic
election since 1955, would be a determining factor for the return
of foreign investors to Indonesia.
"If the election process does not run smoothly and there is
unrest or riots here and there, the effect will be very damaging
to Indonesia's investment climate."
In this worst-case scenario, potential foreign investors would
lose interest in Indonesia, while those who had already obtained
investment approvals this year might not be able to meet their
one-year deadlines to start projects, he said.
The economic crisis and political upheavals over the past year
and a half have driven investors from Indonesia.
Last year, foreign direct investment fell 60 percent in value
to $13.6 billion, from $33.83 billion in 1997.
However, despite their sharp drop in value, in terms of the
number of projects, foreign investments rose by 23.7 percent to
1035 projects last year, from 790 projects in 1997.
Sugihono said foreign investors also feared possible changes
in investment policies if an inward looking political party won
the elections.
Investors feared a new government would dump the open
investment policy introduced by the current administration.
"But I doubt if there will be a major change in investment
policy, even if there is a change in government after the
elections."
Sugihono said signs of improvement in the country's economic
indicators would also play an important role in attracting
foreign investors in the coming months.
The country's economic fundamentals, such as the inflation
rate and the rupiah, have indicated marked improvement in the
past several months. Such indicators would certainly provide more
incentives for foreign investors, Sugihono said.
He said sectors which would still have good prospects next
year included agribusinesses such as fisheries, food crops and
animal husbandry, as well as oil palm, cocoa, coffee and pepper
plantations.
Export-oriented industries using natural resources such as the
mining and furniture industries, as well as management, marketing
and technical consultancies would also remain buoyant this year,
he said. (gis)