German investments expected to start recovering next year
JAKARTA (JP): Direct investment by German corporations in Indonesia, which plunged over the past two years because of the economic crisis, will begin to recover next year, a German Embassy official said on Tuesday.
"The crisis in Indonesia is bottoming out. I am optimistic that German investment will increase starting in 2000," Michael Witter, head of the embassy's economic department, told The Jakarta Post.
A number of German companies continued to invest in Indonesia despite the crisis, he said after the signing of a memorandum of understanding between the Indonesian Investment Coordinating Board (BKPM) and the German Investment and Development Company.
Under the agreement, the two institutions will jointly promote Indonesia to potential German investors.
Witter said German investors could not be steered by the government, but had to be convinced themselves of the opportunities, making an investment institution necessary.
"Indonesia is a special case compared to other Asian countries hit by the crisis. It was not only facing a financial crisis, but it was also entering a new phase of political transition," he said.
BKPM deputy for foreign relations Aiyub Mohsin said the value of German investments approved by his agency this year should at least equal the US$71 million approved in 1998.
BKPM figures show total German investment proposals approved in the first seven months of 1999 reached $34.25 million. Some $4.47 billion of investment by German companies was approved in 1997, the year the crisis hit.
Germany ranks ninth as the largest source of foreign direct investment in Indonesia, with $9.74 billion. It trails Japan, Britain, Singapore, Hong Kong, the United States, Taiwan, the Netherlands and South Korea, according to the BKPM, which compiles foreign investment figures in the nonoil and nonbank sectors.
The plunge in German investment reflects an overall decline in foreign investment in Indonesia.
BKPM said it approved $2.12 billion in investment projects in the first seven months of 1999. It approved $13.56 billion in 1998 and $33.83 billion in 1997.
Not all approved projects are realized, but Aiyub said the realization rate by German investors was among the best at 80 percent.
Separately, State Minister of Investment Marzuki Usman, who also heads BKPM, said on Tuesday President B.J. Habibie was expected to issue a decree within two weeks authorizing regional BKPM offices to grant investment licenses in their respective areas.
This would ensure a cheaper, easier, quicker, more timely and transparent process, Marzuki said during a seminar on investment opportunities in the agribusiness sector in the provinces of Sulawesi and Nusa Tenggara.
To reverse the fall in foreign investment, the government was considering providing more incentives, including tax holidays, for investors, he said, adding that this would entail reviewing existing tax laws.
He said many countries in Asia, South America and Africa used tax incentives to woo foreign investors, chiefly from the United States, Japan, South Korea, Taiwan, Germany and Britain.
"We are facing tight competition. We're no longer the beautiful lady in the region," he said. (02/01)