Good prospects for industries with local content: Sanyoto

JAKARTA (JP): Industries relying predominantly on local resources and with strong export potential will be the most prospective investment sectors this year, a senior official has said.

State Minister for Investment Sanyoto Sastrowardoyo said these sectors include agriculture-based businesses such as plantations, fishery and agro-industry.

The furniture industry would also remain a potential sector to invest in, he said.

Industries which use import components but export most of their products, such as electronic components and automotive parts, would also remain attractive for investors, he told journalists in a year-end briefing on Monday.

Investors could also count on the tourism sector, including hotels and resorts, and service industries such as tourism agencies, consultancy, marketing and management services, he said.

Ground and water transportation services also had potential.

"Overall, these sectors are the smart investments next year (1998)."

Improving economies of developed nations such as the United States and European countries, and the restructuring of global businesses would further stimulate economic activities this year, he said.

Sanyoto, who is also the chairman of the Investment Coordinating Board (BKPM), predicted the currency turmoil, which has caused a drop in the rupiah's value by about 60 percent against the U.S. dollar since July, would remain a major problem for most investors in the country.

He said that due to the high fluctuation in the value of the rupiah, industries relying on imported components would have problems in making projections on their production costs.

But Indonesian goods would be more competitive in overseas markets due to the depreciation, he added.

"This is also a chance to boost the development of the import substitution industry."

The government would continue to make the investment climate conducive for both foreign and local investors, he said, adding that this would include giving incentives to boost investments.

Sanyoto said the investment growth faced both external and internal challenges.

He said the interdependency of global economies had made the economies more fragile, while regional cooperation led to them being more exclusive.

The trend toward trade and investment liberalization and pressure from developed countries for early liberalization also adversely affected countries like Indonesia.

Competition became tighter to lure foreign investment, especially because some countries embarked on offering attractive incentives, he said.

Concurrently, the investment climate was not fully conducive to foreign investment, he said.

Investment had not been spread equally, and downstream and upstream industries were not balanced.

Underdeveloped business partnerships had slowed targets to improve investment in the country, he said.

Poor infrastructure and red-tape, especially in the provincial and lower level administrations, also impeded investment, he said.

Sanyoto added that high interest rates and inadequate human resources continued to be obstacles to investment. (das)