Government moves to promote investment

Urip Hudiono, The Jakarta Post, Jakarta

The government wants to attract more foreign direct investment (FDI) that will be able to create added value to the country's export products and capabilities, an Investment Coordinating Board (BKPM) official said.

For this, the government will continue improving Indonesia's investment climate and promote investment opportunities, eyeing particularly FDIs that are technologically intensive.

"We want 'quality' investments, which can stimulate exports and support the rate of economic growth that we need," BKPM chairman Muhammad Luthfi told The Jakarta Post in a phone interview on Wednesday.

In light of this, Luthfi said the Office of the Coordinating Minister for the Economy, the BKPM and Euromoney investment information services firm will hold a two-day Indonesia Global Investment Forum in London starting on Sept. 8.

The event will be attended by several major investors including the Jardine Matheson business group, financial firm Merrill Lynch, and global energy firm BP, sharing their experience and opinions of the investment opportunities in Indonesia.

Local companies, meanwhile, include several of Indonesia's major companies, such as state oil and gas firm Pertamina, largest lender by assets Bank Mandiri, automotive firm PT Astra International and telco PT Indosat.

The event will be followed by a similar two-day event on Sept. 15 in New York, in which President Susilo Bambang Yudhoyono and Louis Camilleri are scheduled to deliver keynote speeches.

Altria is the parent company of Philip Morris International, that invested earlier this year in Indonesia's top cigarette producer PT HM Sampoerna to the tune of some US$5 billion.

Luthfi explained that technology intensive FDIs were important in creating added value on Indonesia's export products, giving the example that the export value of the country's cocoa could be tripled if it were processed into cocoa butter.

"In the future, we want to see ourselves not as an exporter of raw materials anymore, but at the least semi-processed products, through such investments," he said. "For this, the ministry of industry is working hard to produce a new blueprint for the industrial sector and its related investments."

Indonesia needs a total of $426 billion worth of investment to support an annual economic growth averaging at 6.6 percent until 2009, Luthfi said, and the government can only supply some 20 percent of this through state expenditures.

"The rest must come from FDIs," he said, explaining BKPM's $35 billion target, $60 billion from other investments outside BKPM, and $123 billion from major infrastructure projects.

Data from BKPM shows that FDI approvals from January to June rose 72 percent to Rp 56.34 billion compared to the corresponding period a year earlier.

The government is targeting FDI approvals for this year at Rp 133.41 trillion ($14 billion).

In an attempt to improve the country's investment climate, the government has assigned BKPM to finalize the drafting of a new investment bill that would slash the time needed to set up a business from 156 days to only 30, and ensure proper coordination among ministries.

The government has also vowed to curb rampant corruption and red tape, loosen rigid labor laws, improve tax rates and administration, guarantee legal certainty and improve the country's ailing infrastructure.