Cement projects may be canceled over deadline

JAKARTA (JP): The government will revoke several cement making firm's investment licenses if the firms fail to start projects before next month's deadline, State Minister of Investment Sanyoto Sastrowardoyo said yesterday.

He said the cement-making projects that were likely to lose their licenses were mostly in Central Java.

"The validity of the licenses of these projects have expired. The projects should have been completed in three years, but so far nothing has been done," he said.

There are 12 cement plants and oil refineries in Central Java that have investment approval and are working on projects.

"But from the beginning of this year until today we have not had to revoke any licenses yet," said Sanyoto, who is also the Investment Coordinating Board chairman.

He did not say how many of the projects were foreign investments.

Earlier this month it was reported that four mega projects were due to begin in Central Java this year.

The projects include foreign investment ventures PT Consolidated Electric Power Asia (CEPA) Indonesia, PT Mitra Global Telekomunikasi Indonesia and national private investment companies PT Semen Gombong and PT Semen Grobogan.

PT CEPA Indonesia will spend Rp 4.2 trillion on a 1,300 megawatt power plant in Jepara. PT Semen Gombong will spend Rp 586 billion on a cement plant billion along with PT Semen Grobogan which will spend Rp 630 billion. PT Mitra Global Telekomunikasi Indonesia is spending Rp 1.3 trillion to install 400,000 telephone lines.

Sanyoto said that between January and Feb. 15 this year the government approved 105 domestic investment projects worth Rp 26.98 trillion (US$11.73 billion) and 113 foreign investment projects worth $5.63 billion.

Last year the government issued $29.9 billion in foreign investment licenses, down from $39.9 billion in 1995.

Domestic investment approvals in the corresponding period were worth Rp 100.7 trillion, up from Rp 69.9 trillion.

Sanyoto said most investments were in the textile and downstream and midstream chemical sectors.

"But we would like to see more investments in components, such as for the electronics and automotive industries. We have a lot coming in from Japan, Taiwan and Korea and this is a good trend," he said.

He said investors were seldom attracted to invest in upstream chemical industries because of the huge capital needed to develop the plants.

He said investments needed for an upstream chemical plant could reach $2 billion.

"Apart from the huge capital, you need to wait for about eight years to earn a profit and another eight years to see your money return," he said.

"Upstream industries have small profit margins that rely on large economies of scale," he said.

He said the increase in foreign investment in Indonesia was mostly because of industries relocating.

The impact of the stronger dollar against the yen had little to do with decisions to relocate, he said.

"There is some impact (of relocations) but not much. It is certainly better for those who have their loans in yen," he said. (pwn)