Domestic uncertainties to cloud Indonesia Recovery Fund: Expert
Domestic uncertainties to cloud Indonesia Recovery Fund: Expert
The Jakarta Post, Jakarta
The government will face difficulties attracting sufficient
foreign funds into the planned Indonesian Recovery Fund due to
various domestic uncertainties, according to one economic expert.
Gadjah Mada University (UGM) economist Sri Adiningsih said on
Sunday that slow progress in the implementation of the country's
key economic reform programs, legal uncertainty and security
problems would deter investors from participating in the fund.
"I doubt that the fund can be as successful as the one in
Thailand. There's just too many uncertainties here," Sri said.
She pointed out that the government's failure to sell a
majority stake in the state-owned cement producer PT Semen Gresik
to Mexican giant Cemex SA as scheduled was a major blow to
foreign investor confidence in the country.
Minister of Industry and Trade Rini Soewandi announced on
Friday that the government would launch an Indonesian Recovery
Fund early next year in a bid to attract foreign funds to help
revive the country's anemic real sector and create jobs.
Rini said that the fund would be similar to one established in
Thailand, which managed to raise around US$1.6 billion in cash
from well known institutions such as the Asian Development Bank
(ADB), the World Bank's investment arm the International Finance
Corporation, and Merryl Lynch.
She said that initial funding levels for the Indonesian
Recovery Fund were expected to reach $200 million, with some $10
million to come from the government.
"The government can just go ahead with the plan, but the main
issue here is how to resolve the uncertainties created by
structural (economic) and security problems," Sri said.
Sri said that the various uncertainties had even triggered a
massive capital outflow that, according to a recent report
quoting Bank Indonesia senior deputy governor Anwar Nasution, had
reached an average of $10 billion per annum since the country
plunged into a combination of economic and political crises in
1998.
"If the government could manage to at least reduce the capital
outflow, it would already be a significant contribution to the
economy," she said.
Separately, a business association executive, who requested
anonymity, also doubted the ability of the government to attract
foreign financial institutions to invest in the recovery fund
given the IFC's bad experience dealing with the local legal
system.
"I doubt the IFC will agree to chip in," he said.
The IFC failed to force PT Panca Overseas Finance Indonesia
(POFI) into bankruptcy over $13 million in unresolved debts after
the commercial court ruled in favor of POFI.
Very few creditors have been able to book victories in
bankruptcy cases since the country's new bankruptcy law was
enacted in 1998.