Foreign investment approvals slump 50% until October

JAKARTA (JP): The government approved US$12.7 billion worth of foreign investment projects in the first 10 months of 1998, down 49.8 percent from projects worth $25.3 billion approved in the same period last year, State Minister of Investment Hamzah Haz said on Wednesday.

Speaking after a monthly cabinet meeting on the economy, Hamzah Haz said that domestic investment projects approved in the first 10 months of the year had also slumped to Rp 57.3 trillion ($6.5 billion), a 57.1 percent drop from the Rp 100.3 trillion booked in the corresponding period of 1997.

"However, despite economic and monetary uncertainty and the May unrest, it turns out that investment interest in Indonesia is still there," he told journalists.

He said that his office approved foreign investments worth $4.6 billion during the June-October period alone, adding that a single project worth $1.6 billion was forwarded to his office for approval earlier this month.

"Therefore, up to November (from June), we booked between $5 billion and $6 billion in foreign investment," he said.

Domestic investment also picked up over the June-October period, when projects worth a total of Rp 26.6 trillion were approved by the ministry, he said.

The minister said he was optimistic that domestic investment would continue to rise in the coming months following stabilization of the rupiah and cuts in banking interest rates.

The rupiah is currently trading at 8,800 against the U.S. dollar, down from around Rp 7,000 last month and 2,450 in July last year.

"If we can maintain the rupiah's stability, it would help the investment climate," he said.

Although the signs suggest that investors are beginning to contemplate a return to Indonesia, there is still a problem with realization of the projects approved by the ministry.

"So far, the implementation rate of foreign investment proposals is only 26.9 percent," he said.

Cumulative foreign investment approved since 1967 totals $217.3 billion, but only $58.4 billion of that sum was ever realized in investment projects.

Implementation of domestic investment approvals stands at 33 percent. Out of Rp 650.8 trillion in domestic investment approved since 1967, only Rp 213.7 trillion has been transferred into real projects.

"If we can raise the implementation rate of investment approvals to 50 percent or even 60 percent, our non-oil exports would automatically rise again," Hamzah Haz said.

Minister of Information Muhamad Yunus reported on Wednesday that monthly exports dropped 14.17 percent in August to $4.33 billion when compared to the same month last year.

He said the fall could be attributed to a $3.4 billion drop in oil and gas exports and a $900 million (10.4 percent) drop in non-oil exports.

Meanwhile, Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita said that a delay in the disbursement of the latest $1 billion installment of the IMF bailout fund was purely administrative in nature.

He said the IMF is likely to disburse the money next week. "The board meeting will be held this coming Friday. I think it will be disbursed next week."

He also said the IMF Asia-Pacific director Hubert Neiss would arrive in Indonesia on Monday or Tuesday for a regular monthly review of the country's program of economic reform.

Ginandjar said the current weakness of the rupiah, which had gained 41 percent against the dollar until it fell back this week, was only "temporary."

"Once the Special Session of the People's Consultative Assembly ends, things will go back to normal again and the rupiah should strengthen," he said.

The IMF arranged the multi-billion bailout fund for Indonesia in exchange for a program of economic reform agreed to with the Indonesian government. (prb/rid)