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