Investors cut operations because of uncertainty

JAKARTA (JP): Foreign and local investors have significantly cut the operations of their industrial factories due to uncertainty in the country's political situation, State Minister of Investment Hamzah Haz said yesterday.

"They see the condition still fluctuating and they reduce production activities," Hamzah told reporters on the sidelines of a hearing with House of Representatives Commission V for industry, mining, trade, manpower, the environment and cooperatives.

This was evident in the 70 percent decrease in the imports of both foreign and local investors since last year, said Hamzah, who is also the chairman of the Investment Coordinating Board.

According to the board, imports of capital goods of both foreign investment and local investment in April were down to US$5.80 million from $113.09 million in the same month last year.

In the same month, imports of raw materials also dropped to $150,000, down from $23.88 million in April 1997.

"What will happen is a scarcity in manufactured products, as import activities keep declining," Hamzah said.

He said local and foreign investors had asked him when the situation would return to normal.

"I told them it could take from one to two years," Hamzah said.

The government's plan to hold both an extraordinary session of the People's Consultative Assembly and a general election require long and comprehensive preparations, he said

"My assumption is that legal preparations for the elections will be finished by March of next year, and will be followed by operational preparations, so that the elections could be conducted at the end of next year at the earliest," he said.

But the government must ensure social and economic stability in order to have safe elections, otherwise more social unrest would occur, he said.

There must be adequate supplies of essential goods at affordable prices, and there must be less layoffs, he said.

However, Hamzah dismissed speculation that investors had lost interest in Indonesia.

"New applications keep coming, nobody has canceled their investment plans. Our investment activities are not stagnant," he said.

Hamzah said investment realization had also declined this year.

Between July 1997 and May this year, local investors realized 353 projects with investment worth Rp 19 trillion. In the same period, foreign investors realized 320 projects with investment worth $2.97 billion.

He predicted that the realization of investment approvals would continue to decline in the 1998/1999 period.

But the economic and political crisis had set back the country's investment development to equal that of the beginning of 1970s, when the country was working hard to invite foreign investors, he said.

The government is currently working on establishing a new policy on investment, which includes criteria on eligible recipients of tax incentives. The new policy is being finalized and is expected to be completed early next month, he said.

The new policy will focus on investment activities in the eastern part of the country, he said.

It will be set to boost the export sector and to create more job opportunities, as well as support pioneering business fields and agribusiness, capital goods and machinery industries, he said.

The new policy will also limit the time span of projects' realization to one year, he said.

Currently, companies which cannot complete their investment projects within three years can apply for an extension of up to two years, due to the monetary crisis, he said. (das)