Govt mulling incentives to lure back foreign investors

JAKARTA (JP): Indonesia is considering a package of incentives to attract badly needed foreign investment into the country, a senior official said on Tuesday.

A member of the economic monitoring team, Rizal Ramli, said that the introduction of investment incentives was one of several essential economic measures discussed during a weekly economic meeting led by President Abdurrahman Wahid on Monday evening.

"The President, during the meeting, ordered the minister of finance and the state minister of investment and state enterprises development to work out the investment incentive proposal," he told reporters about the outcome of the weekly meeting.

The weekly meeting also discussed a wide range of economic issues ranging from environmental issues, local residents' resentment against mining companies and preparation for the implementation of the autonomy law next year.

Rizal, who is also the chairman of the State Logistics Agency (Bulog), said political and economic risks would not discourage foreign investors if there was compensation which could guarantee them a high return.

"Only with attractive incentives will the much needed foreign investment return to Indonesia," he said.

Foreign direct investments showed a slight increase in recent months after a major drop in the last two years due to uncertainty in the country's political and economic situation.

Approved foreign investment figures during the first three months this year rose US$475.9 million in March, from $232 million in February and $99.8 million in January.

But analysts said that investments in the forestry and plantation sectors had totally stopped due to the country's questionable security and the government's unfavorable investment policies.

Rizal said that in addition to the political uncertainty, the reluctance of the foreign investors to enter Indonesia was also caused by the country's unfavorable sovereign rating.

The country's massive private debts and the country's social and political risks has damaged the country's sovereign rating.

"The President expressed concern about the country's bad rating and he asked the minister of finance to regularly monitor the country's rating outlook," he said.

According to Rizal, if the positive progress of the country's debt problem was also made known to the international rating agencies, the country's rating would improve. "This would help encourage foreign investors," he added.

During the weekly meeting, the President also asked his ministers to speed up the recapitalization of the banking industry by, among others, establishing clear guidelines to handle the debtors.

Gus Dur, as the President is commonly known, also asked the ministers to take all the necessary steps to better meet the economic reform targets agreed with the International Monetary Fund (IMF), Rizal said.

Rizal said the President wanted Indonesia to be able to meet the set targets on time or even ahead of schedule.

Indonesia signed last week the newly reviewed letter of intent with the IMF after the latter delayed its US$400 million loan disbursement due to the country's failure in meeting targets contained in the previous letter of intent. (prb/cst)