RI warns G-15 of portfolio investment risks

RI warns G-15 of portfolio investment risks

BUENOS AIRES (JP): Indonesia is using the current Group of 15
Ministerial Meeting to draw attention to the possible hazards of
portfolio investment affecting many developing nations.

During the G-15 Ministerial Meeting here on Saturday,
Indonesian delegates introduced the issue and discussed the
possible consequences on the developing world.

Indonesian Foreign Minister Ali Alatas noted that increased
globalization and modernization have introduced more and more
foreign investors to stock markets in developing countries.

"Investments come at a swift speed into the stock exchanges.
However, these portfolio investments could just as quickly
withdraw," Alatas explained.

"Such an event could very well shake the economy of that
country due to the sudden drop in stock values," he said.

Alatas is currently leading the Indonesian delegation to the
fifth G-15 Summit which is being held in the Argentinean capital.

The Summit, which begins today, was preceded on Saturday by a
one-day ministerial meeting.

The G-15 was established in 1989 as a forum for heads of state
and government to forge South-South cooperation and rejuvenate
North-South dialog.

The group is comprised of Algeria, Argentina, Brazil, Chile,
Egypt, India, Indonesia, Jamaica, Malaysia, Mexico, Nigeria, Peru
Senegal, Venezuela and Zimbabwe.

Alatas said that developing countries generally welcome the
influx of foreign investment, though the ease and speed with
which large portfolio investments can be withdrawn have caused
worries to a number of countries with fragile economies.

By using a telephone or fax machine, foreign investors can
transfer enormous sums of money from one end of the world to the
other, leaving developing markets in possible financial peril.

"Indonesia brought this matter to the attention of the G-15
members, and most of the delegates agreed with this analysis,"
Alatas told journalists after Saturday's meeting.

The minister pointed out that the flight of portfolio
investments can be spurred by the slightest rumor which might
reduce an investor's sense of security.

"Whether there is truly a negative development in the economy
in which they are investing or merely psychological apprehension,
they can withdraw their investment at any time," he said.

However, when asked whether a solution had been discussed,
Alatas replied: "Well, we don't know what the answer is yet, but
the main thing is that we have to be aware of this." (mds)