Investors told to enter eastern provinces

JAKARTA (JP): A minister urged investors yesterday to expand their activities to eastern Indonesia and improve links between big and small businesses to create a harmonious and efficient investment environment.

At a communication forum between government officials and businesspeople, State Minister for Investment Sanyoto Sastrowardoyo said investment in eastern Indonesia would help reduce the concentration of business activities in Java and help development in eastern provinces.

According to the Investment Coordinating Board, 64 percent of domestic investment between 1967 and 1996 and 64.5 percent of foreign investment went to West Java, Greater Jakarta, East Java and Central Java.

So most of Indonesia's Rp 452.4 trillion (US$188.3 billion) Gross Domestic Product came from Java and Sumatra.

The chief of the Ministry of Finance's Agency for Finance and Monetary Analysis, Marzuki Usman, said investors preferred to put their money in big, capital intensive cash-cow businesses like the paper, plywood, chemical, pharmaceutical and metal industries, electricity generation, service and trade.

So commercial banks tended to provide more credit for those sectors, he said.

Financial credit for manufacturing industries, for example, steadily rose from Rp 5.4 trillion in 1983 -- when the government introduced its first deregulatory measure in the financial sector -- to Rp 78.9 trillion in 1996.

Credit for the service industry rose from Rp 1.4 trillion to Rp 91.6 trillion and for the trade industry rose from Rp 4.8 trillion to Rp 70.6 trillion.

Credit for the agriculture sector increased slowly from Rp 1.2 trillion in 1983 to Rp 17.6 trillion in 1996.

Consequently, the agricultural sector grew slowly -- 4 percent in 1995 -- while the manufacturing industry expanded steadily -- 11.1 percent in 1995. (10)