FDI drops 11%, domestic dives 70%
Adianto P. Simamora, The Jakarta Post, Jakarta
Foreign direct investment (FDI) approvals dropped by 11 percent to US$5.4 billion from January to September this year from $6.08 billion in the same period last year, according to the Investment Coordinating Board (BKPM), and could go lower after the Oct. 12 Bali tragedy.
Theo F. Toemion, BKPM chairman said that the drop in the FDI approvals was due mainly to lingering social unrest, the labor disputes and a lack of confidence in the legal system here.
"The fall in investment approvals is very tragic, I believe the above factors have led to the drop in investor confidence in Indonesia," Theo told the House of Representatives Commission V overseeing industry and trade affairs.
Worse still, domestic investment approvals dropped even steeper by about 70 percent to Rp 15.99 trillion (US$1.75 billion) in the first nine months of this year, from Rp 50.74 trillion in the same period last year.
Indonesia badly needs foreign investment to achieve economic growth and to create new jobs. The total investment however, has been steadily on the decrease since the economic crisis hit the country in the middle of 1997.
Data from the board showed that in 2001, the FDI approvals dropped 41.5 percent to $9 billion, from the previous year's $15.42 billion. Domestic investment amounted to Rp 58 trillion in 2001.
Both foreign and domestic investors have long been complaining about the discouraging investment climate characterized by security issues, labor strife, corruption and the absence of a credible legal system.
"If we fail to solve these problems as fast as possible, the investment will remain very bad in the future," Theo said.
Theo added that the Oct. 12 deadly bomb blasts in Bali which killed more than 190 people and had not been figured into the latest data, would further discourage investors from coming to the country.
"It will take a long time for investor confidence to recover after the Bali tragedy," Theo said.
Sri Adiningsih, economist at Gadjah Mada University agreed, saying the Bali tragedy would further deal a blow to the investment climate in the country.
"Foreign investors are now very wary. They are waiting for the government's seriousness in solving the (Bali) tragedy," Sri told The Jakarta Post.
Anton Gunawan economist at Citibank, however, expressed optimism that the investment would start to recover next year.
"The Bali tragedy will not cause a drastic fall in investment here. I see several mega projects starting next year in the country," Anton told The Post, adding that the new projects were in the energy sector, the automotive sector, household products and the pharmaceuticals sector.
Elsewhere, Theo said that the agency was now focusing on helping the existing investors overcome their problems so that they would not leave the country.
"During our meeting in Bali last month, many investors complained about many things, including taxation, customs, bureaucratic red tape and labor disputes," Theo said.