Investors worried by social tension: Minister

Investors worried by social tension: Minister

JAKARTA (JP): State Minister of Investment Hamzah Haz said on
Tuesday increasing financial problems and a fear of escalating
social tension have discouraged investors from making any new
capital outlays.

The minister said that he feared that if the situation grew
worse both local and foreign investors might pull out.

The social problem is another blow to those companies which
have already suffered the severe impact of the country's economic
crisis, he said.

"We know that at least 207 foreign and domestic companies are
financially strapped because of the impact of the economic
crisis," he told reporters after a hearing with Commission V for
investment in the House of Representatives.

These companies have not only faced difficulties in raising
credit due to high interest rates but also in obtaining letters
of credit in order to import their raw materials.

"These problems, added to brewing political and social
tensions that have sparked riots in some areas, could further
discourage investor interest in staying in Indonesia," he said.

The latest on-going riots, triggered by religious clashes,
have rocked the eastern province of Maluku since mid-January,
claiming over 150 lives.

Many are worried that unrest would intensify in the run-up to
the June general election, the first since the end of the 32-year
rule of president Soeharto in May.

"Many people are apprehensive that the riots will spread to
other areas," Hamzah said.

Hamzah said many factories had already reduced their
production activities, and are now utilizing only 30 percent to
40 percent of their total capacity.

Automatically, their exports were lowered, he added.

If this situation persists, Hamzah said he was worried that it
would further exacerbate the country's social conditions.

"Unemployment has swollen as it is, and now with companies
running at only 40 percent of capacity, the level will increase
and sharpen social anxieties even more," he said.

President B.J. Habibie said on Monday the number of unemployed
totaled 15.4 million last year.

Hamzah proposed to House members on Tuesday the establishment
of a "Crisis Center for Businesses".

The institution would work to help domestic and foreign
investors with their problems, he said.

It would be along the same lines as the existing Indonesian
Banking Restructuring Agency, he said.

"So far we have only worked with the monetary and banking
systems, but not touched on the real sector. I think it is time
that we set up this institution to determine what is really
happening in the business sector," he said.

He said efforts to revive the collapsed banking and monetary
systems must be conducted simultaneously with those affecting the
real sector.

Meanwhile, Bank Indonesia director Miranda S. Goeltom admitted
on Tuesday that the delay in the start of the government's
program to recapitalize ailing banks would interfere with
efforts to revive the private sector.

"The recovery of the real sector is surely delayed, because
without recapitalization, no banks can resume lending, so
everything is affected," Miranda said on the sidelines of a
meeting with the House Commission VIII on finance.

The government initially planned to announce last Saturday the
names of banks qualified to join its recapitalization programs
and which banks would be closed down because of insolvency, but a
last minute decision has put off the plan for another two weeks.
(das)