Foreign investment set to fall

JAKARTA (JP): State Minister of Investment Sanyoto Sastrowardoyo projected here yesterday that foreign investment approvals are likely to drop by 30 percent to US$27 billion this year from $39.9 billion in 1995.

"The value of foreign investment approvals will decline this year but in term of the number of approved projects, there will be more than last year," he told the media following a hearing between his office and the House of Representatives' Commission on the state budget.

He said that the projected sharp drop in the value of foreign investment approvals this year will not be caused by a decline in foreign confidence in the Indonesian business climate but due to the fact that most of the approved projects require small and medium-scale investments.

"Last year, the value of foreign investment approvals was very high because eight of the approved projects were very large," he said.

Foreign investment approvals rose by nearly 70 percent to $39.9 billion last year from $23.72 billion in 1994. Last year's surge was mainly due to large oil refinery and power generation projects.

Sanyoto said that the eight oil refinery and power generation projects alone were projected to require $12.9 billion in investment, accounting for around 30 percent of last year's total investment approvals.

He told the hearing that in the period between January and Sept. 15, foreign investment approvals reached $24.61 billion,

"We are optimistic that the total value will reach $27 billion by the end of this year," he said.

Domestic

But domestic investment approvals showed a healthier performance in the first eight and a half months of this year. Their value already exceeded last year's total approvals by nearly 20 percent at Rp 82.50 trillion, he said.

Sanyoto said that like in the previous years, the projects approved both under domestic and foreign investment schemes last year were mostly in the manufacturing sector.

The realization of foreign investment projects in the period between 1967 to Sept. 15, 1996, reached $43.35 billion or around 50 percent of the total cumulative value of the approved foreign investment projects.

In terms of the number of projects, the realization rate was much higher, reaching 72.37 percent of the approved investments.

In the domestic investment schemes, the realization of projects in the period between 1967 and Sept. 15, 1996 totaled Rp 137.15 trillion, around 47 percent. In terms of the number of the projects, the realization rate was 72.26 percent over the same period.

The realization rate of investment projects is calculated on the assumption that the project is carried out no more than two years after the approval.

In the first two years of the current sixth five-year development plan, which began in April 1994, the realization of domestic investment projects reached Rp 56.59 trillion.

If the realization of the foreign investments is calculated in rupiah, the total investment realization in the period between April 1, 1994 and Sept. 15, 1996, was Rp 98.89 trillion or around 44 percent of the total investments of Rp 224.7 trillion expected to come from private direct investments in the current five-year development plan period.

Indonesia needs an investment of at least Rp 815.3 trillion to achieve an average economic growth rate of 7.1 percent per annum in the sixth five year development plan period. Of the total, Rp 224.7 trillion was foreseen to come from direct investments, both domestic and foreign.

"We are optimistic that we will achieve the target before the five-year development plan ends in March 1999," he told the commission members. (hen)