Foreign capital inflow 'illusory'

JAKARTA (JP): Foreign capital inflow has yet to reflect a solid return of investor confidence in the country's economy, a noted financial analyst said.

Theo F. Toemion said there were indications that foreign investors actively involved in local markets held close relations with the government.

"Foreign investors actively buying local shares and the rupiah were those institutions and individuals that served as the government's financial advisor. This capital inflow is suspected of being illusory," Theo was quoted on Wednesday by Antara news agency.

He termed "artificial" the inflow of foreign funds.

Most foreign investors are upbeat that the establishment of a new government by the end of the year will speed up the economic recovery. However, they remain cautious about making major investments, partly due to uncertainty from the protracted vote counting from the June general election, Theo said.

He added that economists exhibited a lesser role in promoting efforts to establish the country's economic stability due to the enhanced influence of politics.

"Political party leaders have gained a greater influence in deciding the country's economic stability."

Theo also noted inconsistencies of the International Monetary Fund (IMF) and other international financial institutions in judging the country's economic conditions.

"IMF has a vested interest in saying that the economic condition in Indonesia has recovered. That way they can protect their money and projects in Indonesia," he said. (udi)