Foreign investors may dominate RI businesses

JAKARTA (JP): Foreign direct investment will likely become the country's largest contributor of capital necessary for steady economic growth during the current Sixth Five Year Development Plan (Repelita VI) period.

Economist Cristianto Wibisono said here on Saturday that the government might pursue more direct investment rather than portfolio investment due to its long-term security strategy.

"Looking at all of our economic aspects, direct investment remains much safer for the country than portfolio investment," Cristianto said, commenting on President Soeharto's investment target revision for the current five-year plan period, which ends in March 1999.

In his state address before the House of Representatives last week, Soeharto revised upwards the country's investment target to Rp 815 trillion (US$360 billion) during the Repelita Vi period from the original target of Rp 660 trillion, while he also revised the country's target of economic growth from an average of 6.2 percent to 7.1 percent per annum.

Meanwhile, as indicated by State Minister of Investment Sanyoto Sastrowardoyo last week, the growth rate of foreign direct investment in Indonesia tends to surpass that of domestic investment.

Sanyoto said at a seminar conducted to coincide with the 1995 Indonesian Product Exhibition here that this year foreign direct investment approvals by the Investment Coordinating Board will likely, for the first time, surpass domestic investment.

The minister disclosed that the approval of foreign investment projects during the first seven months of this year alone stood at US$29.4 billion, while domestic investment reached only Rp 33 trillion (US$14.58 billion).

Last year, foreign direct investment approvals were still below the domestic investment record. Last year's foreign investment approvals reached $23.7 billion, increasing almost three times from the previous year's record of $8.1 billion, while last year's domestic investment increased to Rp 59.3 trillion ($26.2 billion) from Rp 39.5 trillion ($26.3 billion) in 1993.

Implementation

The rate of actual implementation has also been much higher for foreign investment commitments than domestic investment. Last year, the implementation rate for foreign investment commitments reached 51 percent, while the rate of domestic investment stood at only 35 percent. This year, the implementation rate for foreign investment is expected to increase to nearly 60 percent, while the rate for domestic investment will likely remain flat.

"Therefore, we have to encourage more domestic investment so that it will not lag further behind foreign investment," Sanyoto said.

He suggested that domestic investors enter labor-intensive sectors, while foreign investors are guided toward entering capital-intensive industries.

A number of legislators, including A.A. Baramuli, Tadjudin Noer Said and Hamzah Haz, as well as businessmen Fadel Muhammad and Aburizal Bakrie, suggested that the government ease licensing regulations to encourage new investment.

Cristianto noted that investors, especially foreigners, will first look at Indonesia's future economic fundamentals before making decisions on investing their money here. "Thus, the government should continuously mend its shortcomings in all sectors to attract more foreign investment."

To help increase foreign participation in the country's investment, Golkar legislator Baramuli suggested that the government ease the ceiling on the foreign ownership of portfolio investment on the country's stock exchanges.

Baramuli suggested that the government increase the portion of foreign ownership to 70 percent of a company's shares listed on the local capital market from the current level of merely 49 percent.

"I think the government should gradually open the country's capital market wider to foreign investors, otherwise we will not meet the investment target for this five-year development plan period," Baramuli said.

Bacelius Ruru, chairman of the Capital Market Supervisory Agency, ruled out expanding foreign ownership at local stock markets in the near future.

"We's better strengthen the role of domestic investors in our stock markets first. Then, if our capital market has a strong base of domestic investors, we might gradually open our market," Ruru said at a seminar here last week. (rid)