Clear guidelines and good returns key to more FDI

Clear guidelines and good returns key to more FDI

JAKARTA (JP): The International Finance Corporation (IFC) has
suggested ASEAN countries draw up clear investment guidelines and
offer attractive returns to foreign investors to maintain high
flows of foreign direct investment.

The chief of the IFC mission to Indonesia and Malaysia,
Antonio H. David, said yesterday ASEAN countries should also
ensure a level playing field for foreign investors so the region
remained attractive for investors.

"If a host government sticks to those guidelines and the rules
of games are very clear, then investors will make their own
commercial decision and judgment. That's what I think the best
approach is," David said after addressing the First ASEAN
Business Summit.

IFC is a World bank affiliate specializing in extending
credits to privately projects 170 member countries.

David said maintaining a conducive investment climate was
important because ASEAN countries still needed large amounts of
foreign private funds to finance their development, especially
infrastructure development.

He said East Asian countries, including those in ASEAN, would
need US$1.5 trillion for infrastructure for the 10 years to 2004.

"The high expectations for private involvement have been
followed by some disappointments. The needs are great, but the
initial momentum seems to have stalled," David told the summit.

One estimate put project financing accomplished in East Asia
at just $5 billion for 1995, a far cry from the $150 billion
needed.

Of this, $3 billion went to two projects: Indonesia's Paiton I
power project and the Philippines CEPA's Sual Power.

David said the main problem was the differences in ASEAN
countries' policy framework.

He said some countries were foreign investor friendly with
clear infrastructure investment policies, while others were still
opening up infrastructure projects to foreign investors.

"That's not a very easy question because once you make any
policy decision, it is difficult to reverse it. So, it needs time
for some countries, and again there are different priorities," he
said.

He said Indonesia and the Philippines were successful in
privatizing their power sectors and he praised Indonesia for
privatization telecommunications and its toll roads.

The chairman of the ASEAN Chambers of Commerce and Industry,
Aburizal Bakrie, said foreign capital would continue to rush in
provided ASEAN countries simplified infrastructure licensing
procedures.

He said infrastructure investment in ASEAN was very promising
because the region offered a return of between 15 percent and 20
percent in dollar terms, far higher than the United States or
Europe. Investment returns in ASEAN were even higher in the power
and telecommunications sectors.

The Malaysian Minister of Entrepreneurs Development, Mustapa
Mohamed, said ASEAN had became one of the developing world's
largest foreign direct investment recipients.

Between 1987 and 1991 ASEAN recorded average foreign direct
investment inflows of 22.1 percent a year, compared to 6.8
percent in Latin American and the Caribbean, 2.4 percent in East
and South Asia and 1.4 percent in Africa.

"We continue to be successful in attracting capital from
outside the region while intra-regional investment flows have
become increasingly important," Mustapa said.

According to the IFC, a dozen countries accounted for more
than 80 percent of net private flows to developing countries
between 1990 to 1995. Five of those were the emerging Asian
economies of China, Malaysia, Thailand, Indonesia and India.
(rid)