Investment approvals up, boosting hopes of confidence revival

Zakki P. Hakim, The Jakarta Post, Jakarta

Approvals for fresh domestic and foreign direct investment (FDI) are on the raise, increasing optimism that a pickup in investor confidence has finally started to set in.

On average, fresh investment approvals -- both from domestic and overseas sources -- rose by 51 percent in the first semester compared to the same period last year to Rp 80.85 trillion (US$8.5 billion), the Investment Coordinating Board (BKPM) announced on Tuesday.

BKPM chairman Muhammad Luthfi said FDI approvals during the January to June period alone posted a jump of 72 percent to Rp 56.34 billion compared to the corresponding period a year earlier.

New investment approvals in the chemical and pharmaceutical industry led the advance with 21 projects valued at $2.6 billion, ahead of the construction sector at 53 projects worth $540.7 million, he added.

Also included in the list of FDI approvals were 34 projects worth $531 million in the transportation, warehousing and communications sectors, 22 projects worth $520 million in the mining sector and 34 projects worth $384 million in the food processing sector.

The bulk of the FDI proposals came from Britain (50 projects worth $989 million), Singapore (108 worth $591 million), Canada (4 worth $553 million), the Netherlands (24 worth $374 million) and Japan (32 worth $332 million).

With Indonesia still struggling to lure back investment in the wake of the crisis, the BKPM data should provide some hope of a return of foreign investment, which is badly needed to quicken the pace of economic growth.

The country's FDI approvals reached their peak in 1995 with a record $39.66 billion, but collapsed to $13.64 billion in 1998 as a result to the Asian monetary crisis and ensuing political turbulence here.

National Development Planning Board (Bappenas) chairwoman Sri Mulyani Indrawati said the figures were encouraging, making the government's full-year total investment target of Rp 179 trillion attainable.

"Achieving 45 percent of the full-year target (by June) is good enough," she said.

The government has targeted FDI approvals for this year at Rp 133.41 trillion ($14 billion) -- similar to what was achieved in 2003.

Other parts of the BKPM report show that domestic and foreign direct investment realization rose 43 percent to Rp 39.7 trillion in the first semester of this year compared to the same period last year.

The increase was mostly attributable to a 70 percent increase of FDI realization during the period to Rp 31.84 trillion -- equal to about 97 percent of the government's full year realization target.

In total, domestic and foreign investment realization in the first six months of the year provided jobs for 129,227 workers.

FDI realization alone provided 69,515 jobs, mostly in the construction, chemical and pharmaceuticals, metals, machinery and electronics, transportation, warehousing and communications, and food processing sectors.

In an attempt to improve the country's investment climate, the government has urged the BKPM to finalize the drafting of a new investment bill that would slash the time needed to set up a business from 156 days to only 30, and that would ensure proper coordination among ministries.

Meanwhile, the government is also vowing to curb rampant corruption and red tape, loosen rigid labor laws, improve tax rates and administration, guarantee legal certainty and work to improve the country's ailing infrastructure.