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Sat, 18 May 2002

JP/FDI approvals fall by 88 percent

FDI approvals fall by 88 percent

Adianto P. Simamora, The Jakarta Post, Jakarta

Foreign direct investment (FDI) approval dropped by 88 percent to US$291.5 million in the first quarter of this year compared to $2.44 billion in the same period in 2001, according to data provided by the Investment Coordinating Board (BKPM).

The BKPM data shows that the number foreign investment scheme projects fell to 189 projects from 281 projects.

BKPM did not explain the reasons behind the FDI fall.

The country has seen FDI falling since 1998 as investors turned away due to various problems such as legal uncertainty, labor strife, security problems and political and economic instability.

Last year, FDI approvals dropped by 41.5 percent to $9.02 billion.

Although the rupiah and the stock market have been on the rise during the first quarter, making the local financial market the best performing market in the region so far, due to rising investor sentiment in the country, analysts said that FDI had yet to return in significant amounts due to lingering problems like legal uncertainty.

BKPM chairman Theo F. Toemion recently proposed a tax holiday facility to attract foreign investors, a plan criticized by officials from the finance ministry, which has been under pressure to collect as much tax revenue to help finance the state budget. President Megawati Soekarnoputri, however, reportedly supports the tax holiday plan.

The BKPM data also reveals that the value of project expansions by existing foreign investors declined in the first quarter of the year to $482.2 million from $523.5 million.

BKPM said that the popular sectors among foreign investors during the period were the trading sector with 82 projects, the service sector with 26 projects, transportation with 13 projects while basic metal, engineering and electronics industries amounted to 12 projects.

Meanwhile, domestic investment approvals during the period of January to March 2002 fell to Rp 847.5 million from last year's Rp 6.72 billion with the number of new projects reaching 27 projects.