Minister plays down investment cancellations

Minister plays down investment cancellations

JAKARTA (JP): Minister of National Development Planning
Ginandjar Kartasasmita dismissed concerns yesterday that the
rising cancellations of foreign investment would have a
significant impact on economic growth.

"Cancellations are normal and it is immaterial to the impact
of our growth forecast, which we maintain at around 7 percent
plus for the rest of the current Five-Year Development Plan
(which runs until March 1999)," Ginandjar told journalists after
speaking at a conference on the economic outlook of Southeast
Asia.

The conference was organized jointly by The Jakarta Post and
the Asia Pacific Economics Group.

So far this year the Investment Coordinating Board has revoked
88 investment licenses, of which 63 belonged to domestic
investment projects worth Rp 900 billion (US$383 million) and 25
to foreign investment projects worth $458 million.

In his keynote speech at the conference, Ginandjar noted that
Indonesia has enjoyed an economic growth of 7.5 percent and 8
percent for the last two years and anticipates to maintain an
average of 7 percent or more for the rest of its long-term plan,
ending in 2018.

"With this growth, we expect to quadruple real income in 25
years. By 2018, we will have an economy close to $1 trillion (in
1993 dollar value) and almost double than in purchasing power
parity terms," Ginandjar said, adding that by that time Indonesia
may be the world's fifth largest economy.

Ginandjar noted that Indonesia's continuing impressive
economic growth, coupled with policy initiatives on small and
medium enterprises, will pay off in an increasingly dynamic
industrial structure.

"Such a structure should be composed of foreign firms, their
large domestic competitors and a multitude of efficient, modern
smaller establishments that are the seedbeds of new generations
of establishments.

"With this transformation, the middle class will become the
backbone of our maturing economy," Ginandjar continued.

He predicted that Indonesia's ongoing industrial
transformation will be, at the same time, followed by a momentous
shift of the country's population from rural to urban areas.

Indonesia's urban population is predicted to grow by 60
percent to 155 million people by 2018 from 65 million people
today.

"Thus Indonesia of the future will have more urban dwellers,
more people working in modern skill-intensive factories and a
large and more professionally oriented service sector," Ginandjar
said.

He noted that such a fast urbanization rate will reduce rural
population density and make the remaining farmers more productive
and better able to afford to implement more capital intensive
farming procedures. The rural areas will become a vast and
growing market for industrial products and thus support the
industrial transformation.

Ginandjar acknowledged that while rapid growth often raises
incomes, at the same time inequality can grow, sometimes rapidly.
And the government must address these problems.

Therefore, he added, the government will continue its efforts
to reduce the existing disparities among regions and groups of
people to reduce possible political instability.

"The government will use its regulatory and spending power to
raise opportunities within regions and groups left behind and
help them attain their economic potential," Ginandjar said.

The government's intervention on the matter will be necessary
considering that high growth does not automatically translate
into equal opportunities for all, he noted.

"People with more education, located closer to economically
dynamic areas, or with other advantages are in a better position
to take advantage of improved conditions than those less
fortunate," Ginandjar told the conference.

To illustrate, Ginandjar said, recent manufacturing investment
has been too concentrated in Java, potentially limiting the
ability of other regions to achieve their potential and creating
environmental stress on Java itself.

According to the Investment Coordinating Board, 62.9 percent
of Indonesia's cumulative approved foreign investment value of
US$159.49 billion between 1967 and May 4 of this year was located
in Java, and 60.5 percent of cumulative domestic investment of Rp
432.3 trillion (US$183.9 billion) was also in Java. (rid)