Embassies may issue initial approvals for foreign investment

JAKARTA (JP): Overseas embassies and consulates general may begin issuing preliminary approvals to foreign investors wishing to open businesses in Indonesia, a minister said here on Tuesday.

State Minister of Investment Hamzah Haz said the embassies and their consulates general also would be assigned to provide technical assistance to prospective foreign investors as part of the program to promote foreign investment in Indonesia.

"It is part of our effort to streamline paperwork to help facilitate the operations of foreign and local investors in Indonesia," Hamzah, who is also the chairman of the Investment Coordinating Board (BKPM), said.

"I hope the plan can be realized in the third quarter of this year," he said on the sidelines of a seminar on industrial estate operations.

Under the new service, potential foreign investors can send their application letters and other requirements to Indonesian embassies or consulates general in their home countries.

The embassies would then select the suitable proposals and forward them to BKPM for possible approval.

"Investors will not have to come to Jakarta to hand in their investment applications. They only have to come here after their proposal has been approved," he said.

Hamzah said foreign and domestic investment continued to feel the impact of the economic and political crises.

During the first three months of this year, he said, 78 domestic investment projects worth Rp 2.1 trillion were canceled.

In the same period, nine foreign investment projects worth US$37.9 million were canceled, he said.

Change of status

Hamzah also said at least 152 local firms had their status changed to foreign companies in the first three months of this year due the transfer of their stakes to foreign investors.

He said the owners of some of the local companies were forced to sell a large part of their stakes to refinance their foreign debt.

"Some owners also had to surrender part of their stakes to their foreign creditors as payment for their debt," he said.

The government divides foreign direct investment into two categories: domestic investment and foreign investment schemes. Companies under the foreign investment category receive some form of incentives.

Hamzah said the number of local firms changing their status jumped 80 percent compared to the same period in 1998. He guessed the number would increase further in the future because many companies considered share placements and equity-to-debt swaps the best alternatives to settling their mounting foreign debt.

Secretary-general of the Office of the State Minister of Investment Asril Noer said changing their status would benefit the companies because foreign investment in the country received a number of governmental benefits, including insurance against possible damage or loss inflicted by war, riots and insurrections, as well as protection against nationalization.

"This protection is guaranteed by the Investment Promotion and Protection Agreement the government signed with 45 other countries, and as foreign investments they are included in the agreement," Asril said.

Asril said the government also was reviewing government regulation No 22/1994 on foreign direct investment.

In a new regulation, he said, all companies with some amount of foreign ownership automatically would be classified as foreign investment.

Previously, companies could choose to be classified as domestic investment or foreign investment, he said.

The government also would allow all companies to sell stakes to overseas investors, he said. Previously, selling stakes to foreign investors was allowed only as part of a company's effort to restructure its debt.

"During the crisis, we think there are a lot of Indonesian companies which want to invite in foreign investors because they need fresh capital to continue operating.

"So we will allow them to sell stakes to foreign parties," he said. (gis)