RI continues to suffer lack of FDI: Survey

JAKARTA (JP): Foreign investors have continued to stay away from Indonesia despite an increase in the global flow of foreign direct investment (FDI) in 2000, according to the United Nation's World Investment Report 2001.

Explaining the report, economist Djisman Simanjuntak of the Centre for Strategic and International Studies (CSIS) said that the FDI figure in Indonesia last year was minus US$4.6 billion, meaning that foreign capital outflow exceeded foreign capital inflow by that amount, an increase from $2.7 billion in 1999.

"(The negative figure) was caused by foreign companies in Indonesia paying off their debts and one or two companies pulling out of the country," Djisman said in a media conference here. The annual report was published by the United Nations Conference on Trade and Development (UNCTAD).

The report also said that Indonesia's FDI index now ranked 134 out of 135 countries monitored by UNCTAD, or second from the bottom preceding Yemen, he said.

Djisman said that it was the third year in a row that the country had suffered negative foreign investment flow.

The flow of foreign direct investment dropped to minus $0.4 billion in 1998 after a peak of $4.7 billion in 1997, according to the report.

Djisman said that the mid-1997 economic crisis and the ensuing political uncertainties had caused foreign investors to look elsewhere.

"Indonesia has yet to be seen as an attractive investment destination, mainly because of the lack of infrastructure and high quality skilled workers," he said.

Foreign investment through mergers and acquisitions (M&A) also dropped last year to $819 million compared to $1.2 billion in 1999.

Djisman said that pro-active initiatives from three government institutions involved with foreign direct investments -- the Indonesian Bank Restructuring Agency (IBRA), the State Ministry for State Enterprises and the Investment Coordinating Board (BKPM) -- were needed to attract reluctant investors.

So far, the sale of assets under IBRA and the privatization of state enterprises had not achieved much, he said, adding that an immediate divestment of 51 percent of Bank Central Asia (BCA) to a strategic investor could attract investors.

"It's a shame that we like to wait around," Djisman said.

According to the World Investment Report, the flow of foreign direct investment in Southeast Asia remains at pre-crisis levels.

FDI contribution from members of the Association of South East Asian Nations (ASEAN) toward developing countries in Asia continued to decline to only 10 percent in 2000 compared to more than 30 percent in the mid-1990s, it said.

"This was caused by the increase of investment in other countries in the region and Indonesia's divestment policy since the economic crisis," Djisman explained.

Global flows of foreign direct investment soared by 18 percent last year to a record $1.3 trillion, but was expected to decline this year, the report said.

"The main impetus behind both last year's growth and this year's projected drop are cross-border M&As, which constitute a substantial share of FDI worldwide," the report said.

However, after last year's peak the trend is now declining, affected by the overall slowdown in economic growth, it said.(tnt)