Election fever, bomb blamed for decline in investment

Election fever, bomb blamed for decline in investment

Damar Harsanto, The Jakarta Post/Jakarta

The Jakarta Investment Coordinating Board (BKPMD) revealed on
Wednesday that foreign investment as of August had plunged
sharply by 58 percent to US$1 billion against last year's $2.5
billion.

Investment in the first eight months was made through 376
approved projects, more than the 341 projects approved for 2003.

Domestic investment also decreased to Rp 2.627 trillion as of
August, compared to Rp 3 trillion last year.

The board did not provide figures for the corresponding period
last year.

"The decrease is mostly due to lingering concerns by investors
about the business climate and security in the country," said
BKPMD head Muzahiem Mokhtar.

Muzahiem acknowledged that red tape and uncertainty in the
investment procedures also put off investors.

The new report, cosponsored by the World Bank and its private
sector lending arm, the International Finance Corporation (IFC),
ranks Indonesia as one of the most difficult places in the world
to do business.

It ranks Indonesia along with Laos, Cambodia and Vietnam in
the bottom quartile of the 145 nations surveyed on the ease of
doing business.

The recent bomb attack outside the Australian Embassy in
Kuningan, South Jakarta, which killed 11 people and injured over
180 people, put the city's investment climate further into limbo.

"I talked to several foreign businesspeople, mostly those in
the property sector, in Singapore in June, who said they
preferred to wait until the new government drew up a policy on
investment," said Muzahiem.

Despite the apparent gloomy outlook, he said old investors
kept expanding business in the city.

"The fact that requests for the expansion of existing
investment is much higher than requests for new investment
reflects that they still see their business here as money
machines," he said.

He referred to his board's data showing the expansion of
foreign investment as of Sept. 30 this year hovered at $610
million, well above new investment of only $218 million.

Among the biggest investing countries are Japan, Singapore,
Hong Kong, the Netherlands, the United Kingdom, Australia, the
United States, Germany, South Korea and France.

The administration said earlier that it planned to bypass
several city bylaws that impede investment in a bid to encourage
investors to come here.

The administration will also prepare a new bylaw to provide a
one-stop service for investors operating in the capital in an
effort to cut down on bureaucracy.

I-Box
.rm
Foreign and Domestic Investment from 1995 to August 2004

Year Project Total of foreign project Total of domestic

investment investment

(billions of US dollar) (trillions of rupiah)
______________________________________________________________
1995 197 1.918 150 10.228
1996 294 3.752 193 16.660
1997 170 847 120 4.843
1998 306 703 56 3.318
1999 429 777 33 1.222
2000 692 1.364 88 5.388
2001 487 313 45 5.752
2002 563 1.234 46 2.375
2003 341 2.527 38 3.002
2004 376 1.066 20 2.627

Source: Jakarta Investment Coordinating Board