RI still faces difficulty raising foreign investment

RI still faces difficulty raising foreign investment

By Kornelius Purba

TOKYO (JP): Indonesia will still face difficulties in attracting foreign investment next year, especially from Japan, if political uncertainty and security instability remain, an official of the powerful Japan External Trade Organization (JETRO) warned on Tuesday.

Speaking to The Jakarta Post on Tuesday, JETRO researcher on Indonesia, Hiroto Tsuge, said investors are also likely to opt for a wait and see attitude before deciding to pour fresh money into the country, because they want to get a clearer picture on the implementation of regional autonomy next year.

"In my opinion, investment is increasing gradually, but I am afraid of decentralization, because under new autonomy laws the provincial government is allowed to invite investors directly, not through the central government," said Tsuge, who was asked by his office to explain the details of the JETRO's 2001 White Paper on Global Investment to the Post.

According to Tsuge, Japanese investors will continue increasing operations gradually in Indonesia and bring fresh investment next year, though many Japanese companies themselves, are currently struggling with their own financial problems.

With the implementation of regional autonomy, he cited the provinces in Java, and in Riau, as possibly being the most attractive for foreign investors because these regions have sufficient infrastructure, including transportation, water supplies, electricity, and telecommunications.

The economist, who is a specialist on Indonesia, also warned that the gap between rich and poor provinces will widen sharply and will create new difficulties for the government.

"I am afraid that the central government will not be able to control the provinces," Tsuge noted.

Based on data on the number of approved foreign investments from January to July this year in Indonesia, Tsuge said that manufacturing, basic metals and the chemical sectors are likely to be among the most favored sectors from foreign investors.

When asked about the interests of Japanese companies to purchase assets and property controlled by the Indonesian Bank Restructuring Agency (IBRA), the economist said companies are not enthusiastic about taking over assets due to their own internal difficulties.

"The companies themselves are struggling with their own financial problems," he noted.

Separately, Masufumi Ishii, the director of the Second South East Asia Division of the Foreign Ministry, said that Indonesia was on the right track in its democratization process and is undergoing a process of economic recovery.

He appealed to the people and the international community to be more patient as the country was facing huge problems that needed to be resolved in the short and medium term.

The diplomat added that the Indonesian people and government should have more self-confidence and that they are able to rid themselves of the current hardship despite the complexity of the problems involved.

The Indonesian economy, both from a macroeconomic and microeconomic perspective, is showing a recovering trend and it will continue to grow in the forthcoming years, he noted.

"You cannot escape from short-term problems, you have to live with them. It takes time to resolve problems as there are no quick solutions," said Ishii.

Ishii also warned that foreign investors will continue to take a wait and see position on Indonesia until the government is able to restore political and security stability, reinforce the law and create a transparent and clean governance.

"They will only return if you settle their concerns," he hinted, adding that the Japanese government realizes that Indonesia needs more time to end the crisis.

Ishii, whose authority includes overseeing Indonesia, also said that the Indonesian economy is also showing significant progress, not only because of the sharp increase of oil and gas prices on the international market, but also due to fundamental improvements to the economy itself.

Ishii said non-oil and gas exports and domestic demands are growing rapidly, imports of working capital and the country's foreign exchange reserves are also increasing. However, the inflation rate is slower than the Japanese government predicted.

Citing reports from Japanese private companies operating in Indonesia, he said that the automotive industry is currently enjoying a boom, as the sales of cars and motorbikes continues improving.

"The booming sales of motorbikes show that the economic recovery is touching the middle class," he said.