Govt to revive investment in Aceh, Maluku, Poso

The Jakarta Post, Jakarta

In an attempt to boost investment, the government plans to revive business and investment activities in some conflict-torn areas in the country, such as Central Sulawesi's town of Poso as well as the provinces of Aceh and Ambon.

At the top of the agenda is to seek ways to improve local businesses' access to financing from banks, Bank Indonesia governor Burhanuddin Abdullah said on Friday following a meeting with Vice President Jusuf Kalla.

"A memorandum of understanding between the central bank and the government will be signed, which will then be followed by the setting up of a team assigned to draw up steps and policies," Burhanuddin told a press briefing.

On his part, Burhanuddin added, the central bank would provide a formula that could revive lending from the banking sector to local enterprises in the conflict areas.

The team will comprise officials from the central bank, Ministry of Finance, the office of the State Minister of State Enterprises and the Indonesian Credit Insurance (Askrindo) -- all to be coordinated by the office of the Coordinating Minister for the Economy.

In the first phase, however, the plan would focus only on the plantation industry, Burhanuddin added, which had been largely abandoned and even damaged after years of bloody conflict.

Decades ago, the government had opened plantations in several post-conflict areas with the support of Bank Indonesia, banks and the private sector, he said.

"And for those plantation businesses to get back on track, they need fresh capital," he said.

As to what obstacles the government might face in carrying out the plan, he said most would stem from the fact that many plantations had "yet to settle their old debts from the previous projects".

"For example, the National Private Plantation in Aceh ... have unpaid debts of Rp 250 billion (US$27.53 million), so how are we going to resolve that? That's why there is going to be a team to assess all these (aspects)," he said.

The government of President Susilo Bambang Yudhoyono has pledged to prioritize improving the business climate on its must- do list.

In order for economic growth to attain the level necessary to reduce the country's chronic unemployment and poverty problems, a boost in investment was vital, analysts have said. But during the past couple of years, investment particularly foreign direct investment has been scarce due to a host of problems including security, labor conflict, poor implementation of regional autonomy, and unfavorable tax policy.

The country can no longer rely merely on robust domestic consumption as the main driver of growth, as this is deemed unsustainable.