Government urged to work harder to regain investor confidence

A'an Suryana, Dadan Wijaksana, The Jakarta Post, Jakarta

The government still has plenty of homework to do if it is to fully regain investor confidence -- necessary to accelerate economic growth -- otherwise the megaproject relaunch will merely serve as a marketing gimmick on the part of the government, analysts have said.

While admitting that the resumption of the strategic projects would give a boost to the economy, Centre for Strategic and International Studies (CSIS) economist Pande Radja Silalahi warned the government against getting preoccupied with this, thereby jeopardizing efforts toward improving fundamental problems.

"This will open up the possibility of gaining greater confidence from investors in times to come, but in order not to make it pointless, follow-up action is needed so that investors will pay more intention to the country," Pande told The Jakarta Post on Thursday.

"The basic thing is that we need investors badly, so we have to provide them with what they want, which is a positive business climate, legal certainties, stability, etc."

Pande was commenting on Wednesday's recommencement of 13 megaprojects, worth US$7.63 billion, categorized as fertilizer, electricity and petrochemical projects, in a move the government has claimed to be a sign of reviving investor confidence.

Pande disagreed however, arguing that all 13 projects were mostly old ones, and did not involve much new investment.

According to data provided by the Office of the Coordinating Minister of the Economy, of the 13 projects, construction in ten had already been completed and some had even started operational production.

The remaining projects had either just commenced, such as that of fertilizer maker PT Pupuk Kujang, or construction had been in progress. Construction in the expansion project of fertilizer firm PT ASEAN Aceh Fertilizer was 30 percent complete, while the petrochemical one at Tuban had reached 60 percent.

The completed projects are mostly for electricity generation, in the hope that this would enable the country in the future to increase electricity generating capacity, to keep up with a nine percent increase in power demand each year.

The story remains the same with petrochemical and fertilizer projects.

To this extent, Pande agreed, saying, "There is no way we can accelerate our growth without sufficient power generation capacity and there is no way we can have higher rice production without giving farmers cheap fertilizer. This (the projects) will definitely be beneficial for us in the future."

Meanwhile, Coordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti said on Thursday the megaprojects would be followed by another batch of projects, including the development of toll roads, mining projects and others.

Meanwhile, banking observer Ryan Kiryanto said that the projects could send signals to foreign investors that the economy here was just starting to recover from the crisis, which started in 1997.

However, the attempt to win over foreign confidence could not succeed as long as there was a lack of confidence in other supporting, yet fundamental, sectors of the economy such as good governance, law enforcement and legal certainty.

"... if such a problem is not properly addressed, none of the PR (public relations) attempts by the government will be successful," he said.