IFC to boost its investment in RI

Rendi A. Witular, The Jakarta Post, Jakarta

The International Finance Corporation (IFC) plans to boost its investment in Indonesia despite the legal harassment it suffered here over the past two years, according to its local representative.

Newly-appointed IFC country manager for Indonesia German A. Vegarra said on Thursday that for fiscal year 2003, which started in June this year, the investment arm of the World Bank might invest four to five times more than what it invested during the previous fiscal year.

He said that IFC would focus its investments in the financial sector, agribusiness, infrastructure, small and medium-sized enterprises (SMEs), and extractive industries like mining, and oil and gas.

"Over the last two years, the IFC has faced serious legal hurdles which drove down investment activity in fiscal year 2002 to just US$21 million. If there are no significant obstacles for us in the next year, we plan to increase our investments," said Vegarra, adding that the investment firm was still optimistic about the economic prospects of the resource-rich country.

Vegarra said that fiscal year 2002 was a disaster for IFC in Indonesia since all of its resources were focussed on dealing with battles in the local courts.

He described fiscal 2002 as an "abnormal" year for the IFC in its operations in Indonesia.

"In a normal fiscal year, our investment in Indonesia can reach US$400 million to 500 million," said Vegarra, a Peruvian national.

One example of the legal harassment encountered by the IFC here was the Manulife Indonesia case in which the local unit of the giant Canadian insurance firm was controversially declared bankrupt by the Central Jakarta Commercial Court. But after strong protests from various sides, including the Canadian government, the Supreme Court annulled the bankruptcy ruling in June.

The IFC owns about 9 percent of Manulife Indonesia.

The IFC's grand strategy for empowering the country's SMEs is to set up a $25 million SME facility in the eastern part of Indonesia. The facility will provide technical assistance to the SMEs, including how to seek bank loans and to become export- oriented firms.

The IFC will also invest in the country's ailing textile industry to help the strategic sector regain its competitiveness on the international market.

"We see that Indonesia has a huge raw materials supply, strong supporting industry, and low labor wages. With capital support, we expect that the ailing textile industry will be heaved in the near future," said Vegarra who refused to disclose the planned investment figure.

Since 1956, the IFC has invested US$2.2 billion in Indonesia, which makes the country its sixth largest exposure. The IFC portfolio in Indonesia includes 35 companies.

On Oct. 21, the corporation will host the second private sector forum, which is aimed at enhancing dialog between the country's private sector and the government so as to improve the investment climate.

The forum is part of the pre-Consultative Group on Indonesia (CGI) events. The CGI groups the country's traditional lenders and will meet later this month in Yogyakarta to decide on a new loan for Indonesia.