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.