Mergers, acquisitions valued at $4.3b last year
JAKARTA (JP): Indonesia booked a dramatic increase in the value of mergers and acquisitions to $4.3 billion last year, according to the latest world investment report published by the United Nations Conference on Trade and Development (UNCTAD) on Tuesday.
The annual report says that 80 percent of the merger and acquisition ended with foreigners as the majority stakeholders. At the same time, Indonesian companies have purchased over $2.4 billion through merger and acquisition overseas, it says.
As with other crisis-hit countries in the region such as South Korea, Thailand, the Philippines and Malaysia, cross-border mergers and acquisitions would continue to dominate the flow of foreign direct investment (FDI) this year.
"The value of cross-border mergers and acquisitions in Indonesia has reached over $1 billion during the first half of this year," it added.
Currency depreciations have increased the attractiveness of the affected Asian economies to foreign investors by lowering the production costs, says World Investment Report 1998: Trends and Determinants issued by UNCTAD.
The report says overall FDI flows in the five Asian economies most affected by the crisis remained at a level similar to that of 1996.
There were moderate decreases in FDI flows to Indonesia, Malaysia and the Philippines and no change in South Korea, while those to Thailand increased by over a half, although Thailand was the first Asian country to be stricken by the crisis.
The report also said FDI inflows to Indonesia were the third highest in the Asian region last year and reached US$ 5.35 billion, dropping from $6.19 billion in 1996. The amount of inflows follows that of China and Singapore.
FDI inflows to China were the highest in the region last year, reaching a record $45.3 billion from $40.8 billion in 1996, it said.
Inflows to Singapore, second highest in the region, also reached a record $10 billion last year, up from $9.4 billion in the previous year.
Malaysia followed Indonesia with $3.75 billion, a fall from $4.6 billion in 1995.
The report also notes increasing inflows to Thailand. FDI to Thailand surged by 58.7 percent to $3.6 billion last year from $2.2 billion in the previous year.
According to the report, FDI inflows to developing South, East, and Southeast Asia rose 8 percent last year to a record US$87 billion, led primarily by increased flows to China.
The report says the amount represents 57 percent of all FDI to developing countries.
The report stated FDI flows into Asia and the Pacific this year may at best remain the same as in 1997, largely due to the Asian financial crisis.
This would be the first time since 1985 that FDI flows into this region did not rise.
The report says the world's largest transnational corporations continue to dominate FDI flows.
"They are boosting their investments into more developing countries, participating in a rising volume of cross-border mergers and acquisitions, and entering into an expanding total of international joint venture agreements," the report says.
Transnational companies from developed countries dominated FDI flows to developing countries.
Flows of FDI from transnational companies headquartered in developed countries rose slightly to a new record total of $359 billion from $283 billion in 1995.
FDI inflows to developed countries also rose slightly to $233 billion from $195 billion.
In commenting on the report, Hadi Soesastro, Director of Studies of the Centre for the Strategic and International Studies (CSIS) said that FDI to Indonesia was expected to drop almost by 50 percent this year to around $3 billion due to the uncertainty in the country's political, economy and social stability. (gis)