Investment agency urged to improve business climate

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)