Investment agency urged to improve business climate

JAKARTA (JP): President B.J. Habibie urged the government's investment agency yesterday to create a healthy and favorable business climate to lure back foreign investors to the crisis-hit country.

"I am pleading to all levels of the agency, central and local offices, to support the efforts to revive investment activities in the country," Habibie said at the opening of the meeting of the Investment Coordinating Board's (BKPM) officials.

He called for a stop to all bureaucratic procedures, including the elimination of recommendation letters, which could slow down investment approvals

He also ordered the board's provincial offices to list business opportunities in their areas, especially in the agribusiness and mining sectors, that could be offered to local and foreign investors.

He said the investment board and foreign affairs ministry should coordinate the country's efforts to promote business opportunities through the recently set-up Trade, Tourism and Investment Promotion Agency.

Habibie admitted the government's past errors in establishing policies and making calculations had partly contributed to the current economic problems.

Correcting the mistakes must become the government's first priority, the President said.

The current high outflows of capital from Indonesia indicated that the business climate had not yet been restored, he said, adding that the nation's welfare was now at its lowest ebb since the crisis began.

State Minister of Investment Hamzah Haz reported to the President yesterday the value of the foreign investments approved during the January to July 15 period of this year dropped 47.5 percent to $8.5 billion from $16.2 billion despite an 18.9 percent increase in the number of projects to 504 from 424.

The value of domestic investment projects approved during the January to July 1 period dropped 59 percent to Rp 30.9 trillion (US$2.27 billion) from Rp 75.3 trillion in the same period last year. The number of projects dropped 57.2 percent to 180 from 420 in the January/July period last year.

The economic turmoil and political uncertainty had slowed down approvals this year, Hamzah said.

Approvals had dropped drastically since the May riots which led to the resignation of president Soeharto.

Hamzah, who is also BKPM chairman, said the realization of domestic investment approvals since April 1994 to June 1998 totaled 1,746 projects worth Rp 69.2 trillion.

In the same period, 1,415 foreign investment projects worth $18.80 billion plus additional rupiah financing of Rp 10.05 trillion had been realized, he said.

Hamzah is leading a three-day meeting attended by officials from all the board's provincial offices. Several ministers and top government officials are also participating.

Hamzah and Minister of Cooperatives, Small and Medium Enterprises, Adi Sasono, signed yesterday an agreement to empower small and medium enterprises (SMEs) and cooperatives through partnerships with foreign and local investors.

He also signed an agreement with the Central Bureau of Statistics, which will help the ministry collect, process and present data on investments across the country.

Hamzah pledged to establish investment policies that catered more to small businesses.

The country's current economic structure took the shape of an inverted pyramid, causing the economy to be vulnerable to external blows, he said.

More than 38 million of the country's SMEs represented only 5 percent to 10 percent of the bottom part of the economy, compared to only 200-odd large conglomerates running the top part of the inverted pyramid, he said. (das)