FDI approvals jump by 68.6% in first four months

Adianto P. Simamora, The Jakarta Post, Jakarta

Foreign direct investment (FDI) approvals rose by 68.6 percent in the first four months of this year to US$3.1 billion from the same period last year, the office of the Coordinating Minister for the Economy said in a press release on Friday.

"It shows that existing (foreign) investors remain interested in developing business in the country," the ministry said.

However, domestic investment approvals did not follow the sharp increase in the FDI.

Approved domestic investment plans dropped by 51.6 percent to Rp 4.2 trillion ($471.91 million) in the first four months of this year compared to the same period in 2002.

Investment approvals have been declining after the country was hit by the economic and political crisis of 1998.

In 2002, FDI approvals plummeted by 35 percent to $9.7 billion from the previous year of $15.06 billion, while domestic investment approvals dropped by 57 percent to Rp 25.26 trillion, from 58.62 trillion.

Experts have long warned that the country's pressing problems of legal uncertainty, security problems and poor implementation of regional autonomy had been some of the factors that have discouraged both foreign and domestic investors from investing here.

Boosting investment is vital for the recovery of the country's ailing economy to help create new jobs for millions of unemployed people and prop up economic growth.

The economy grew at a slower rate in the first quarter of this year due to slow domestic consumption and falling investments.

Realizing the importance of investment, the government declared the year 2003 as Indonesia Investment Year in a campaign to attract more investors to the country.

Speaking at a press conference on Friday, Coordinating Minister for the Economy Dorodjatun Kuntjoro Jakti said that the current investment data -- issued by the Investment Coordinating Board (BKPM) -- did not illustrate the real investments being made in the country because investments in publicly listed companies and in the oil and gas sector were not included.

"We will change the calculation soon by including the above sectors," Dorodjatun said.

Portfolio investment has been on the rise in Indonesia as evident in the rising stock market value and successful sale of assets under the Indonesian Bank Restructuring Agency (IBRA).

Trend of Investment Approvals

------------------------------------------------------ Year Domestic FDI

(Rp billion) (US$ billion) ----------------------------------------------------- 1997 119.8 33.7 1998 57.9 13.6 1999 53.5 10.8 2000 93.9 16.1 2001 58.8 15.1 2002 25.3 9.7 2003* 2.2 2.4 ------------------------------------------------------

* Jan-March Sources: The Coordinating Investment Board