Investors get two-year extension to start projects

JAKARTA (JP): The government has decided to grant a two-year extension to local and foreign investors facing difficulty in starting their projects on time, State Minister for Investment Sanyoto Sastrowardoyo said yesterday.

Sanyoto, also the chairman of the Investment Coordinating Board, told a hearing of the House of Representatives that investors having difficulty should apply for the extension from the ministry.

Investors who are granted permits for projects are normally required to start their project within three years.

Sanyoto said several companies had already applied for the extension.

"Until the economy returns to normal again, we are taking a lenient approach to investment firms that cannot meet their deadlines," he told members of House Commission V for manpower, trade and investment.

Sanyoto said some investors and companies had had to delay the implementation of their commitments due to the currency crisis, which has seen around a 35 percent drop in the value of the rupiah since July.

Over 90 percent of the investors' funds did not come from their own equities but from bank loans, most of which were from offshore banks, he said. Dollar appreciation has inflated the loan values, he said.

The tight monetary policy imposed by the government to defend the rupiah had also shot up the credit interest rates in local banks, thus lowering demand for loans to finance the projects, he said.

Sanyoto said he expected the rate of investment this year and next year to decline because of the economic slowdown.

He did not detail the likely decline, saying the ministry had no way of predicting it at this stage.

"Between 1992 and this year, an average of 47 percent of the investment commitments had been made by local investors, while 53 percent were made by foreign investors every year," he said.

"But the economy will continue to be uncertain, so that we would not expect the starting rate between last July and next March to be anything like that in the past four and a half years," he said.

The ministry expects an inflow of foreign and domestic investment of around Rp 224.7 trillion (US$61.41 billion) during the sixth five year development plan, which will end on March 31, 1999.

Sanyoto said investors' enthusiasm to make commitments had not declined, despite the monetary crisis.

Between January and Nov. 8, local investors had committed to Rp 110 trillion in investments in the country, and foreign investors $29.6 billion, he said.

In the whole of last year, local investors committed about Rp 100.7 trillion and foreign investors $29.9 billion, he said.

Investment commitments increased by Rp 3.18 trillion in October from the previous month, to Rp 17.58 trillion for 149 projects.

Foreign investors made up $4.88 billion of the commitment and local investors Rp 12.7 trillion, he said. (das)