Reduce debts, add investment: Economist
JAKARTA (JP): Economist Djisman S. Simandjuntak warned yesterday that Indonesia's debt payment level is so high that the government must try to reduce its balance of payment impact by improving the investment climate.
"We can reduce the impact by attracting the inflow of more foreign equity through direct investment," Djisman told journalists here after a hearing with the House of Representatives' Commission I, which deals with information and foreign affairs.
He said the idea of selling state-owned enterprises through foreign stock exchanges was another possibility. "Such a debt- equity swap is done by other countries like Mexico and Argentine to reduce their debt burdens."
Minister of Finance Mar'ie Muhammad said here on Monday that the yen's surge against the American greenback significantly raised, in dollar terms, the amount of Indonesia's outstanding debts to over US$100 billion, including some $40 billion of private borrowing.
According to the state budget plan, the government's foreign debt service this fiscal year stands at Rp 17.89 trillion (US$8 billion), accounting for almost 38 percent of its total routine spending of Rp 47.24 trillion, while the current account deficit is projected to rise to $4.09 billion this fiscal year from $3.56 billion in 1994-1995 and $2.94 billion in 1993-1994.
President Soeharto said last week that Indonesia was quite capable of managing its foreign debt. He even hinted that if necessary, Indonesia could settle all of its foreign debts by selling state-owned companies because their assets now reach US$160 billion.
Djisman said yesterday that direct investment, however, is more desirable than any debt-equity swap. Therefore, the government needs to further improve the investment climate.
He noted that Indonesia's investment climate is less conducive than those of its competitors, especially Malaysia, Singapore and China.
"We have pretty good chances of attracting more foreign direct investment. And our foreign investment should be able to reach double the current level," Djisman said.
The Investment Coordinating Board has reported that Indonesia recorded US$17.36 billion in foreign investment approvals for 322 projects during the first five months of this year. Last year, foreign investment hit a new record of $23.7 billion for 449 projects, almost three times higher than the 1993 figure of $8.14 billion.
Djisman said the main hindrances for foreign investment are arduous bureaucracy and local partners whose performances frequently discourage foreign investors from doing business in Indonesia.
"Once foreign investors have closed deals with their local partners, they are required to proceed with their projects. But this is not always the case," Djisman said.
A survey conducted by the Japan External Trade Organization, the results of which were released in Tokyo this week, revealed that Indonesia's bureaucracy was the worse among the members of the Association of Southeast Asian Nations. The survey indicated that the other problems faced by Japanese companies operating in Indonesia included poor customs service and steady increases in labor wages. (rid)