IMF expects investment in RI to recover in 2002
The Jakarta Post, Jakarta
The International Monetary Fund (IMF) predicts foreign investment in Indonesia will recover despite the lingering global economic gloom, providing the government can strengthen the local investment environment through policy reform measures.
IMF senior representative for Indonesia David C. Nellor said on Monday that signs of foreign investors' renewed interest in Indonesian assets had surfaced.
Among them were last month's sale of state telecommunications firm PT Telkom Indonesia, and the recent surge in the Jakarta Stock Exchange (JSX), both indicating the presence of foreign investors, he said.
"There are some signs that, if the government is able to maintain some momentum and build on this, there is growth for a stronger investment environment during the year," Nellor told reporters on the sidelines of a seminar on the 2002 economic outlook, held by the Danareksa Research Institute on Monday.
The government sold last month US$300 million worth of shares in PT Telkom through a block sale, in which, analysts said, foreigners had dominated.
The rise of 9 percent in the JSX within the last three weeks, the sharpest rise globally, is also believed to have been driven by foreign capital.
But the outlook on the global economy remains bleak -- causing a dry spell in the availability of foreign capital.
Nellor explained that foreign investor interest in Indonesian assets was based on improving confidence in the domestic economy.
"We would expect it (the recovery of investment) to come from a number of policy areas that would strengthen confidence," said Nellor.
Among the measures that could build confidence, he said, were a credible sale process for Bank Central Asia (BCA) and progress in the sale of other banks and state companies.
Elsewhere, Nellor said that the IMF would discuss with the government a controversial proposal to soften the repayment terms of debts owed by former bank owners to the Indonesian Bank Restructuring Agency (IBRA).
Nellor said talks would cover the government's rationale for extending the repayment period for IBRA debtors to 10 years from four, and lowering the interest rate.
An IMF mission is scheduled to arrive in Jakarta in the first week of February to discuss progress in the implementation of the country's overall economic reform program.
Most debtors have yet to make a single repayment, three-and-a- half years into their agreements with IBRA, and the agency said it had mostly been on the losing side of litigation against large, delinquent debtors.
IBRA has argued that an extension of the repayment period was necessary to allow the debtors to repay their debts and contribute to the agency's cash target this year, to help reduce the state budget deficit.
But the debt extension plan had stirred controversy, with reports saying that economic ministers were divided on the issue.
Nellor said he did not want to comment on the merits or otherwise of an extension, but added that primary consideration must be given to the budgetary impact of such a move.
"I think it is fair to say the present arrangement has not worked," Nellor told reporters.
"But we will come with an open mind to evaluate and listen to what the government has to say."