FDI drops 11%, domestic dives 70%

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.