Reduce debts, add investment: Economist

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)