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)