Foreign investors may dominate RI businesses

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)