Foreign investment approval plunges 22 percent this year

JAKARTA (JP): The value of foreign investment approved by the Investment Coordinating Board (BKPM) plunged this year to US$10.6 billion from $13.6 billion in 1998 and $33.8 billion in 1997.

Realized foreign investment, regarded as a better measure of investors' confidence, however, rose to $7.64 billion from $5.77 billion over the past year.

BKPM, which processes all investment applications outside the oil/gas exploration and production sector and the financial sector, attributed the decline in foreign investment approvals this year to political uncertainties and the prolonged economic crisis.

"Although Indonesia remains attractive to foreign investors, political uncertainties have kept them away," BKPM vice chairman Andung A. Nitimihardja said.

Indonesia held its first democratic general election in June, which was followed with a presidential election in October. While these two landmark political events strengthened the Indonesian rupiah and stock prices, they unsettled investors.

Andung said most foreign investors were waiting for concrete economic steps from the new government of President Abdurrahman Wahid.

The number of approved foreign investment projects rose to 1,068 from 1,035 in 1998. Of these, 627 were related to export.

Of the $10.6 billion in approved projects, $3.3 billion were in the chemical industry, $2.3 billion in electricity, gas and drinking water industries and $1.4 billion in the paper industry.

Saudi Arabia tops the list of countries of origin, accounting for $3 billion from four projects in oil refining facilities.

Australia comes second with $2.5 billion worth of investment from 54 projects, Taiwan with 83 projects worth $1.5 billion, Singapore investing $700 million in 136 projects and Japan with 63 projects worth $600 million.

Approved domestic investment projects also dropped in value and number this year, largely because of scarce liquidity in the country's banking sector, Andung said.

BKPM approved 216 domestic investment projects worth Rp 52.5 trillion ($7.5 billion) this year, compared to 324 projects worth Rp 60.7 trillion. In 1997, the value reached Rp 119.9 trillion.

The value of realized investment projects, however, also increased to Rp 91.3 trillion from Rp 10.47 trillion in 1998.

The paper industry dominated the local investment scene with Rp 20.2 trillion, followed by the food industry with Rp 12.7 trillion and the metal industry with Rp 6.3 trillion.

Approved foreign and domestic investments should create 500,000 new jobs, of which 8,695 will go to expatriates, according to BKPM estimates.

Andung said he expected investment, especially from foreigners, to increase on the basis of a stronger economy coupled with a stable political outlook.

"I can't give any figure, but foreign investment will rise sharply," he predicted.

BKPM identified agriculture and animal husbandry, maritime, plantation and mining among the most promising sectors next year.

BKPM plans to form a national committee to enhance Indonesia's investment promotion effectiveness next year, which will be officially dubbed "Indonesia Investment Year".

President Abdurrahman has traveled abroad extensively since his appointment in October to woo investors to Indonesia. He plans to travel to 13 European countries next month. (03)