Foreign direct investment down 66% in Jan-Feb
The Jakarta Post, Jakarta
Approved foreign direct investment (FDI) plunged by 66 percent in the first two months of this year from the same period last year amid rising uncertainty ahead of the country's first direct general election.
Data from the Investment Coordinating Board (BKPM) reveals that FDI approvals in Indonesia fell to US$805.4 million during January and February 2004 from $2.4 billion in the corresponding period last year.
During the period, the government approved 106 new FDI projects worth $360 million and 30 expansion plans worth $227.7 million, while 15 domestic investment projects worth $217.7 million turned their status into FDI.
University of Indonesia economist Chatib Basri explained on Monday that the fall in the FDI figure was caused by uncertainty in the run-up to the general election, which prompted many investors to delay their projects until they could get a clearer picture of the situation.
He added that the FDI figure could not provide an accurate indication of investment prospects in the country until after the second semester of 2005, when the political situation became clearer.
The country will hold its first direct presidential election on July 5, followed by a possible second round on Sept. 20. Prior to the presidential election, the country will hold a legislative election on April 5.
Investment has been relatively scarce over the past several years mainly due to a poor investment climate amid various problems such as legal uncertainty, labor conflicts, the poor implementation of regional autonomy, corruption and security problems in some parts of the country.
The low investment has caused the economy to grow at a meager rate of less than 4 percent as it has been mainly driven by domestic consumption while exports have also been slow.
Increasing investment is crucial to accelerate economic growth and create more jobs for the millions of unemployed people.
The government is targeting the economy to grow by around 4.8 percent this year.
Elsewhere, the BKPM said that out of the January-February FDI figure, the hotel and restaurant sector pulled in $261 million -- the highest amount from among all sectors. The second position was taken by the metal, machinery and electronic industries with $152.9 million, followed by the food industry with $122.2 million.
The BKPM data, however, show that domestic investment approvals increased by 16 percent to Rp 3.07 trillion ($356.14 million) in the January-February period of this year from Rp 2.58 trillion in the same period last year.
Chatib explained this was only an approval figure and not a real one. However, he said that the increase was probably due to the country's improving macroeconomic fundamentals.