Expansion by foreign firms stronger in 2002: BKPM

Dadan Wijaksana, The Jakarta Post, Jakarta

Despite the poor image of the country's business climate, some existing foreign investors continued to make expansion plans last year, according to the Investment Coordinating Board (BKPM).

While the US$9.7 billion in foreign direct investment (FDI) approvals in 2002 recorded a 35 percent drop compared to the investment level in 2001, one third of this, or around $3.7 billion, had been intended for expansion projects.

BKPM said this was more than twice the $1.6 billion expansion plans approved in 2001.

"The data shows that existing (foreign) companies still have opportunities to develop and expand their business activities here in Indonesia," BKPM said in a statement.

The data did not specify the reasons behind the increase.

The board elaborated that the expansion plans mainly covered four sectors: transportation, storage and communications; trade and repair; construction; and metal, machinery and electronics.

In the construction sector, expansion-related investment plans increased to $224 million last year from $9.6 million the previous year.

The transportation, storage and communications sector saw investment approvals worth $303 million, compared to $31.6 million in 2001.

Investment approvals in the trade and repair sector increased from $118.8 million to $359.6 million, while the metal, machinery and electronics sector also experienced a rise from $203.1 million to $260.7 million.

Although slim in terms of value, the figures were encouraging as they offered respite amid a host of problems clouding the country's investment climate.

This indicates that there are indeed plenty of sectors that possess ample chances for serious development by the government to retain the momentum of expansion plans and keep them flowing.

While figuring out how to lure new investment still appears to be a hard nut to crack, maintaining the existing investments is the least the government can do.

In the meantime, the government could gradually tend to its housework in order to create a domestic environment conducive to investment.

The long list of unfinished tasks, which have caused a rapid deterioration of foreign confidence in operating businesses Indonesia, includes labor conflicts, legal uncertainty, unfavorable tax system, and regional autonomy.

Since the country plunged into a combined economic and political crisis in 1998, the FDI in Indonesia has been in a declining trend.

A steeper decline was seen in domestic investment approvals, which last year saw a 57 percent drop from Rp 58.62 trillion to Rp 25.26 trillion.