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.