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)