Low investment realization investors' fault: Sanyoto

JAKARTA (JP): State Minister of Investment Sanyoto Sastrowardoyo said yesterday the low number of realized investment commitments were due to the shortcomings of prospective investors.

He said the high number of unrealized investment commitments, by both domestic and foreign firms, had been mainly caused by companies' financial problems.

The minister said the low commitment had also resulted from the unfeasibility of projects, which in turn stemmed from a poor market and difficulties in getting raw materials.

"Investors also have trouble acquiring land for their projects and must frequently face rifts from within their companies or between shareholders," he said.

Sanyoto, also chairman of the investment coordinating board, spoke at a hearing with members of the House of Representatives' Commission VI on industry and investment.

Legislator Iskandar Mandji from the Golkar faction yesterday blamed the low number of unrealized investment commitments on inefficiencies, caused by numerous fees (which in some cases reached 40 percent of production costs), high interest rates and red tape.

"These inefficiencies are caused by the bureaucracy," he said.

Investments

Sanyoto said yesterday that during the 1968-1996 period, realized domestic investments reached 6,467 projects worth Rp 140.2 trillion (US$60.95 billion). This was 71.5 percent of the total number of approved projects during that period and 46 percent of total approved investment value.

In the same period, realized foreign investments reached 2,241 projects worth $45.8 billion. This was 70.1 percent of the total number of approved projects and 47.7 percent of total approved value.

Of realized domestic investments, 4,178 projects (64.6 percent) worth Rp 104.2 trillion (74.3 percent) were located in Java. Only 1,120 projects valued at Rp 15.1 trillion were located in much-promoted eastern Indonesia.

Meanwhile, of realized foreign investments, 1,179 projects (79.4 percent) worth $31.4 billion (68.6 percent) were located in Java. Only 212 projects (9.5 percent), valued at $7.2 billion (15.7 percent), were located in eastern Indonesia.

Iskandar yesterday questioned the low number of export- oriented projects which had been established in the country.

According to the Investment Coordinating Board, only 271 out of 810 domestic investment projects approved last year had been export-oriented. The 271 projects had the potential to export $14.8 billion of goods per year.

Meanwhile, 520 projects out of 959 foreign investment projects approved last year were export-oriented. These 520 projects had the potential to export $9.9 billion worth of products per year.

Export-oriented

Sanyoto said on a cumulative basis, during the 1968-1996 period, 4,911 foreign investment project approvals had been export-oriented. These had the potential to bring in $71.3 billion worth of exports per year.

During the same period, 10,411 domestic investment project approvals were export-oriented and were expected to reap $125.3 billion a year.

Iskandar pointed out the proportion of export-oriented projects by both domestic and foreign investors averaged at around 30 percent last year.

"This means that foreign investors are coming here for our domestic market ... If this continues, domestic manufacturers will no longer have a share in the local market and will become mere spectators," he said.

Sanyoto said in such a situation, Indonesian businesses had no choice but to improve efficiency, quality and productivity.

"This should be seen as a practicing ground for free trade," he said.

However, Iskandar pointed out it would be difficult for businesses to increase competitiveness if the cause of their inefficiencies had been red tape.

"How are local businesses supposed to compete in such an unhealthy investment climate against foreign companies which are highly efficient and are given special facilities?" he asked. (pwn)