'Incentives do not guarantee investment'

'Incentives do not guarantee investment'

JAKARTA (JP): A study conducted by the Indonesian Institute of
Sciences has found that special facilities and incentives given
to investors did not guarantee an influx of foreign investments.

"Foreign investment in Indonesia is lagging far behind
Malaysia, for example," Awani Irawati, coordinator of the
research team on Indonesia and APEC in International Political
Economy Development, said Tuesday.

The study found direct foreign investment in Indonesia reached
US$2 billion in 1993 and $2.10 billion in 1994, compared to
Malaysia's $4.34 billion and $5 billion over the same period.

So if foreign investment is to be boosted the government has
to fulfill other requirements like the creation of a conducive
business climate, legal certainty and efficiency, she said.

"Such things as weak infrastructure, licensing, inconsistency
in regulations and illegal levies discourage investments," she
was quoted by Antara as saying.

She said government deregulation packages like those issued on
May 23, Jan 26 and June 4 in 1996, were partial measures.

"It is thus advisable for Indonesia to switch from a
development operational strategy, which is partial in nature, to
one which is comprehensive and integrated. This strategy must not
rely on economic variables alone but must also involve
noneconomic elements," she said.

Touching on Indonesia's economic growth in the APEC forum, she
said Indonesia had three great opportunities.

"The first is that there will be a free flow of investment
which will bolster national industry. It has to be admitted,
though, that national ownership of relevant industries will, as a
consequence, weaken," she said.

The second was related to the transfer of technology from a
developed country, she said but added that caution must be
exercised because this may simply be the relocation of saturated
industries or those with high pollution risks.

The third was that Indonesia's population of 200 million
people assured a big supply of manpower and potential consumers,
she said.