Embassy bombing will affect FDI

Embassy bombing will affect FDI

The Jakarta Post, Jakarta

Amid reports of a continuing slump in foreign direct
investment (FDI), Indonesia is in for even gloomier prospects
after the recent Australian Embassy bomb attack, according to
Indonesian-Australian Business Council chairman Noke Kiroyan.

While refusing to release specific data, Noke said on Thursday
that the bomb blast had discouraged some Australian investors --
who had earlier intended to invest here.

"For existing investors, the impact may not be that massive.
But for those who are still in the process of investing here, it
has caused great concern.

"They're at least canceling their investment plans, if not
pulling out altogether," Noke told a press gathering, while
calling on the authorities to quickly catch the bombers and
introduce measures to avoid similar occurrences in the future.

Noke is the latest industry figure to voice concern about the
impact of the bombing, which has killed nine people so far and
injured more than 180 others, on investment, especially from
overseas.

The stock market, however, quickly recovered from the shock of
the bombing, with the Jakarta Stock Index breaching a new record
of 822 points at one point on Wednesday. The index ended lower
on profit-taking.

Even before the terror attack, foreign direct investment (FDI)
was scare as a result of various uncertainties and problems. FDI
approvals during the first seven months of this year fell by 33
percent to US$3.3 billion from $4.97 billion in the same January-
July period of last year.

After the bomb blast, security fears have added to the already
long list of obstacles deterring investment. A lack of legal
certainty, corruption, taxation problems, labor disputes and the
chaotic implementation of local autonomy are among the major
problems being faced.

The volume of trade between Indonesia and Australia is valued
at $9 billion per year, and is on the upward path. Indonesia is
currently Australia's tenth largest export destination.

Noke said the council had not yet been able to come up
definitive figures on which or how many investors had canceled or
postponed their investment plans here, as it was still collecting
information.

For Indonesia, the lack of foreign investment has deprived the
economy of a powerful growth catalyst, with the economy having
grown by a modest rate of around 4 percent over the past couple
of years.

Investment now accounts for less than 15 percent of the
country's gross domestic product (GDP), with domestic consumption
contributing some 75 percent.

The return of foreign investment is seen as the only way of
generating stronger economic growth of at least 6 percent
annually -- which is believed to be the minimum level necessary
to provide employment for the some 2.5 million people joining the
labor force each year, and thereby reduce poverty and
unemployment.

Chris Kanter of the Indonesian Chamber of Commerce and
Industry (Kadin), who was also present at the gathering, said
that Indonesia was now considered less attractive than Malaysia
and Vietnam in terms of investment, and on a par with Cambodia.