Seven projects bring investment record of $22b

Seven projects bring investment record of $22b

JAKARTA (JP): Plans to establish seven large projects will
bring foreign investments to a new record high of US$22 billion
this year, State Minister for Investment Sanyoto Sastrowardoyo
said here yesterday.

Sanyoto, also chairman of the Investment Coordinating Board
(BKPM), noted that this year his office has approved 301 foreign
investment projects with a total value of US$19.9 billion as of
Sept. 24.

"It's a new record in foreign investment, one which may even
exceed $22 billion by the end of this year as the licenses of two
large projects are still pending our approval," Sanyoto told
newsmen after meeting with President Soeharto at the Merdeka
Palace here.

According to BKPM, the previous foreign investment record was
set in 1992, when the board approved foreign investment projects
worth $10.3 billion. Last year, foreign investment commitments
declined to $8.1 billion.

Sanyoto explained that out of this year's foreign investments
of $19.9 billion, $7.5 billion will be used to finance the
establishment of seven large projects, consisting of four oil
refineries, two power plants and one steel mill.

The two projects, whose licenses are still being processed,
are part of the seven large projects.

BKPM's approval on the four private oil refineries in Aceh,
East Java and South Sulawesi has drawn protests from a number of
legislators in the House of Representatives (DPR), including Budi
Harjono of the Indonesia Democratic Party, Iskandar Mandji and
Tadjudin Noer Said of the ruling Golkar faction.

They claim that the approval of the four planned refineries
violates Law No. 44/1960 and Law No. 8/1971, which require any
investor in the oil industry to cooperate with the state-owned
oil company Pertamina.

Export

Sanyoto argued yesterday that the approval of the four planned
refineries does not violate existing regulations because 100
percent of their raw materials will be imported from the Middle
East. Three of the planned refineries will export all of their
products, while the other one will export only 65 percent of its
products.

"Because the latter refinery will sell its products
domestically, it will surely have to cooperate with Pertamina or
sell its products to Pertamina, which will then resell them to
the public," Sanyoto contended.

Of the four refineries, two will be constructed in East Java
by PT Buana Ganda Perkasa with an investment of $3.5 billion and
PT Asia Pacific Petroleum with $1.1 billion. The other two will
be built in Sabang, Aceh, by PT Sabang Oil Refinery with an
investment of $1.6 billion and in Pare-Pare, South Sulawesi, by
PT Indo Mudi Oil with $1.03 billion.

Past records show that only 51 percent of foreign investment
commitments were realized. As a result, Sanyoto said President
Soeharto had asked him to summon the license holders from the
four planned refineries once every three months to report the
development of their projects.

"Investors actually have three years to implement their
investment commitments but if they do nothing within six months,
we will revoke their licenses," Sanyoto warned.

The Ministry of Mines and Energy will also monitor the
implementation of the refinery projects every six months, he
said.

The minister said he also reported to President Soeharto that
over 65 percent of foreign investment projects approved this year
will be located in Java.

Sanyoto said he therefore proposed that the government give
more incentives to investors who are willing to set up projects
in the eastern provinces of the country.

The proposed incentives could be in the form of tax holidays,
lower interest and longer grace periods on banking credits, the
reduction of private spending on infrastructure development and
fringe benefits to taxable incomes.

Sanyoto said that as of Sept.24 this year his office also
approved 637 domestic investment projects worth Rp 44.71 trillion
($20.5 billion), as compared to 548 projects worth Rp 39.5
trillion approved last year.(rid)