Foreign direct investment drops 15 percent

Dow Jones, Jakarta

Foreign direct investment (FDI) approvals in Indonesia dropped nearly 15 percent to US$7.16 billion in the first 11 months of 2002 from $8.42 billion in the year-ago period, the Investment Coordinating Board (BKPM) said.

It didn't give any reason for the drop. But, analysts blamed it on the lingering social unrest, labor disputes, a weak legal system, and the Oct. 12 Bali bombing, which killed around 190 mostly western holiday makers.

BKPM said that $1.75 billion of the total FDI amount approved in the 11 months of the year is for expansion of existing plants in Indonesia.

It remains unclear if those foreign investors who have already obtained approvals will actually go ahead with their plans.

The board said the drop in the value of domestic investments was even steeper, falling 62 percent to Rp 21.47 trillion ($2.41 billion) during the same period from Rp 55.93 trillion a year ago.

The world's fourth most populous country badly needs new investment to achieve above 4 percent annual economic growth in order to reduce huge unemployment in the country.

So far, growth has been mainly driven by domestic consumption as both investment and export performances have been waning due to uncertainties both at home and overseas.