Govt approves $1.2b FDI in five months of 2001

Govt approves $1.2b FDI in five months of 2001

JAKARTA (JP): The government approved some US$1.2 billion in
foreign direct investment (FDI) in the first five months of this
year, compared to $1.6 billion in the same period last year,
deputy head of the Investment Coordinating Board (BKPM) Yus'an
said on Friday.

Speaking to reporters following the inauguration ceremony of
the new BKPM chief, Theo Thoemion, Yus'an said that most of the
approvals were for investment in the service sector, including
trade, consulting and construction.

He added that investment in the industrial sector was focussed
on electronics, food, chemicals and plastics.

Yus'an did not say the reason for the decline in the FDI, but
foreign investor interest in the country has been declining over
the past couple of years amid economic woes, domestic political
instability and legal uncertainty.

Yus'an said that he had not yet heard of foreign investors
closing down their operations in this country, although he
admitted that some had cut down their scale of business.

The United Nations reported last October that FDI into the
country reached $4.6 billion in 1997.

But since the regional financial crisis hit the country in the
middle of 1997, political instability has increased, investor
interest in Indonesia has fallen.

The UN report said that the flow of FDI to Indonesia suffered
a deficit of $3.3 billion in 1999, much larger than the deficit
of $350 million in the previous year. This means that foreign
capital outflow exceeded foreign capital inflow to the country.

Theo declined to provide much comment, but he admitted that
wooing foreign investment into the country would be a difficult
job amid the current political uncertainty and domestic security
problems.

Theo is a legislator of Vice President Megawati
Soekarnoputri's Indonesian Democratic Party of Struggle, the
largest party in the House of Representatives. He had been
working for several years at Bank Indonesia before he quit and
became an independent currency analyst.

Experts said that FDI to Indonesia in the near future may only
come through mergers and acquisitions, particularly with the sale
of various banking assets by the Indonesian Bank Restructuring
Agency (IBRA).

IBRA, which controls around Rp 540 trillion worth of assets,
had so far only sold around 20 percent of the assets.

Finance Minister Rizal Ramli had instructed IBRA to accelerate
the sale of the assets as the agency's mandate will end in
February 2004.

The proceeds from the sale of the IBRA assets will help
finance the state budget deficit. For this year, the agency is
targeted to raise around Rp 27 trillion in cash. (rei)