Japanese investment grows despite 'national car' dispute

JAKARTA (JP): State Minister of Investment Sanyoto Sastrowardoyo said yesterday that Japanese investments in the country continue to increase, despite Japan's objection to Indonesia's "national car" policy.

Sanyoto told reporters after meeting with President Soeharto that Japanese investments approved by the government during the period between January and June 27 reached US$4.9 billion in value, or nearly 40 percent above the total investment commitments of $3.5 billion made by the Japanese last year.

He said Japan's high investment commitments in the first semester of this year indicated that Japanese investors remain confident in Indonesia's business climate.

"It clearly shows us that concerns about a possible decline in the Japanese investments were completely wrong," he said.

Such concerns surfaced after the government granted a pioneer status in February to Timor Putra, owned by Soeharto's youngest son, Hutomo Mandala Putra, to produce a "national car" in cooperation with Kia Motor of South Korea. The status would allow Timor Putra to receive special tax facilities, including the exemption of import duties and luxury taxes.

The tax incentives, which will last for three years, will enable the company to sell its 1,600cc car at half the price of Japanese makes of the same class.

Major automobile giants from Japan, the United States and Europe demanded that the Indonesian government revise the "national car" project, saying that the exclusive treatment given to Timor Putra is against the free trade principles set by the World Trade Organization.

They said that the unfair car policy could also discourage foreign investments, especially those from Japan.

Sanyoto said yesterday that most of the Japanese investment commitments were made a few weeks after the government announced the new car policy.

Japan is the largest investor in Indonesia, followed by Britain, Hong Kong and the United States.

"If Japanese investors halt their investments in Indonesia, they will miss the chances," he said. "If they did not come, other foreign investors would come in and take their places."

The total foreign investment approvals in the period between January and June 27 rose by 8 percent to US$20.9 billion from $19.4 billion in the same period of 1995.

Sanyoto said that foreign investment approvals, which rose by nearly 40 percent in 1995 to $39.9 billion, were expected to book a flat growth this year.

"We hope this year's investment approvals would be the same as last year," he said.

Unlike foreign investments, domestic investment approvals grew much faster in the first semester, rising by 120 percent to Rp 64.2 trillion from Rp 28.8 trillion in the same period of 1995.

"The domestic investments approved in the January to June period reached almost last year's level of Rp 69.9 trillion," he said, adding that the majority of the new domestic investment approvals are directed to plantations.

Sanyoto said that the new domestic investment projects are expected to open job opportunities for around 1,290,000 workers, far more than the 342,000 jobs expected from the domestic investment projects approved in the first semester of last year.

Most of the new investment commitments are targeted for paper manufacturing, plantations, food processing, housing, industrial estates, power generation and the hotel industry. (hen)