FDI rises, Mauritius tops the list
Evi Mariani, The Jakarta Post, Jakarta
Foreign direct investment (FDI) approvals rose sharply in terms of value during the first semester of the year from the same period last year, with tiny African island-state Mauritius topping the list of countries of origin.
The Investment Coordinating Board (BKPM) reported a 43.9 percent increase from US$3.03 billion during the first semester last year to $4.37 billion this year.
The foreign investors who received approval in the first semester promised to absorb 113,606 domestic employees and 3,279 foreign workers.
However, BKPM recorded a 34 percent decline in the value of new projects and a 27 percent decline in the expansion projects' value. The sharp rise in total value resulted from companies changing their status from domestic to foreign investment.
The "change of status" value jumped 17 times to $2.4 billion from $139 million in the same period last year.
Of this increase, Mauritius accounted for 73 percent ($1.75 billion) of the total value of the change of status investment, comprising seven projects.
Mauritius, which outranked the country's largest FDI source, Japan, last semester, accounted for $826 million in FDI approvals last year, mostly in the form of change of status investments.
In terms of numbers of projects, the sectors most attractive to foreign investors in the first semester of this year were trade and repair, which both accounted for 38 percent of the 497 projects approved over this period. "Other services" accounted for 14 percent, while metal, machinery and the electronics industry made up 10 percent.
In terms of value, the transportation, storage and communications sectors were the largest recipients of FDI in the first semester, with $1.96 billion. They were followed by the non-metallic mineral industry with $506.8 million.
Investment approvals have been declining since the country was hit by the economic and political crisis in the middle of 1997.
In 2002, FDI approvals plummeted 35 percent, while domestic investment approvals dropped 57 percent.
The government has declared 2003 as Invest in Indonesia Year in a bid to attract more investors.
Responding to the mounting pressure from foreign investors to improve the investment environment, the government has pledged to allocate more portion of next years' budget to fix infrastructure.
As for domestic investment value, BKPM reported a 36 percent decline in value to Rp 8.17 trillion (US$996 million) from Rp 12.77 trillion in the six months to June.
Domestic investors whose projects were approved during the first semester planned to absorb 23,898 domestic workers and 233 foreign workers
In terms of the number of projects, the most popular sector for domestic investors in the period were the chemical and pharmaceutical industries, accounting for 15 percent of the 95 projects approved. The food industry accounted for 14 percent.
In terms of value, the leading sector for domestic investors was the food industry, which booked Rp 1.85 trillion, followed by the transportation, storage and communications sector with Rp 1.6 trillion.
Aside from issuing approvals, in the first six months of the year BKPM also issued permanent licenses to foreign investors who want to realize a total of 218 projects valued at $1.06 billion. The projects will absorb 44,128 employees.
The agency also issued permanent licenses to domestic investors who want to realize a total of 44 projects valued at Rp 2.62 trillion in the first half of the year. The projects will absorb 13,514 employees.