Govt mulling incentives to lure back foreign investors

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)