FDI approvals rise as hundreds of companies plan for expansion

Adianto P. Simamora, The Jakarta Post, Jakarta

Hundreds of the existing foreign investors plan to expand their businesses in the country despite lingering legal uncertainty and possible rising security problems ahead of the 2004 national elections.

The Investment Coordinating Board (BKPM), in its latest report, said that expansion plan approvals were 121 projects in the first-five months in 2003, compared to 117 projects in the same period of last year.

"The data shows that the existing foreign companies still have opportunities to develop and expand their business activities in Indonesia," the board said.

The data on foreign direct investment (FDI) approvals rose by 84.8 percent in the first five months in 2003 to US$4.02 billion from the same period last year, including approvals for expansion plans valued at $530 million.

The most popular sectors for foreign investors were trading and repair; metal, machinery and electronic manufacturing and hotels and restaurants.

Meanwhile, despite the fact that the total domestic investment approvals dropped sharply by 54 percent to Rp 5.9 trillion during the first-five months, the number of expansion projects has been on the rise.

The board said that, as of May, there were 35 expansion project plans from domestic players with the total investment of about Rp 1.6 trillion.

The popular sectors for domestic players include the food industry, chemical and pharmaceutical production as well as transport, storage and communication.

The food industry has been the most popular of all for domestic investors with investment approvals in the period amounting to Rp 1.7 trillion. That is followed by the chemical and pharmaceutical industry, which recorded Rp 940 billion in investment approvals.

Investment approvals had been declining since the country plunged into a combined economic and political crisis in 1998.

In 2002, for example, FDI approvals plummeted by 35 percent to $9.7 billion, while domestic investment approvals dropped by 57 percent to Rp 25.26 trillion.

Experts said legal uncertainty, security problems and poor implementation of regional autonomy were among 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 to meet this year's 4 percent economic growth target.

After declaring the year 2003 as Indonesia Investment Year, the government has tried hard to attract more investors to the country, offering various incentives.