Investors cut operations because of uncertainty

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)