FDI approvals fall 42% in first semester: BKPM

FDI approvals fall 42% in first semester: BKPM

Dadan Wijaksana and A'an Suryana, The Jakarta Post, Jakarta

Foreign direct investment (FDI) approvals dropped by 42
percent to US$2.5 billion in the first half of this year from
$4.3 billion in the same period last year, the Investment
Coordinating Board (BKPM) said in a press release on Tuesday.

The board, however, did not offer any explanations for the
decline or provide other details.

Separately, a senior government official attributed the drop
in FDI approvals to a combination of uncertainty in the global
economy and the country's declining investment competitiveness.

"The global downturn had prompted investors to be more careful
and selective in investing their money," Firman Tamboen of the
Office of the Coordinating Minister for the Economy said on
Tuesday.

A string of financial scandals in the U.S. has painted an even
bleaker outlook for the global economy, threatening to jeopardize
the fragile recovery process.

Firman also said that as an investment destination, Indonesia
was considered less competitive than other countries.

While he did not provide any data, Firman said many analysts
and businesspeople had said that labor disputes, the volatile
political situation and confusion over regional autonomy
discouraged investors from bringing their money into the country.

But most of all, the country's corrupt and unpredictable
judicial system has lessened investors' appetite for investment
here, he said.

BKPM chairman Theo F. Toemion previously acknowledged that
legal uncertainty played a significant role in pushing investors
away, saying that efforts to attract more investment would fail
if the country remained half-hearted about legal reform.

Since the economic crisis struck in the late 1990s, investment
approvals for both foreign and domestic investors have declined,
as the risks for investing in the country have risen.

Last year, FDI approvals dropped by 41.5 percent to $9.02
billion from the previous year. For 2001, domestic investment
amounted to Rp 58 trillion.

The BKPM also said in its press release that domestic
investment approvals dropped by more than 70 percent to Rp 11.1
trillion in the first half of this year, from Rp 39.8 trillion in
the same period last year.

Indonesia badly needs foreign investment to help push its
higher economic growth, which would create more new jobs for the
millions of unemployed in the country.

The government projected the economy to grow by 4 percent this
year, but experts have said that this would not be enough to
absorb the millions of people made jobless by the late 1990s
economic crisis.

Unlike short-term investments, such as those in the capital
market, direct investments are seen as having a greater impact on
economic activity and sparking quicker economic growth.

Over the last two years, domestic consumption has been the
primary mover of the country's economic growth.

Firman promised that the government would take steps to regain
the confidence of foreign investors.

"We are determined to create a favorable climate for
investment, including the immediate completion of a new
investment law being drafted by the BKPM," said Firman.