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)