S'pore investors have cold feet over RI

S'pore investors have cold feet over RI

SINGAPORE (AP): For decades, Singapore's executives looked out of their sleek office towers and saw opportunity in the islands of Indonesia, happily investing in the sprawling and impoverished archipelago.

But when Indonesia's once-booming economy collapsed three years ago in the Asian economic crisis, conservative Singaporeans in the tiny, but wealthy, free enterprise powerhouse began reducing investment in the world's fourth most populous nation.

Investors' fears were amplified by unrest in the nation. Soeharto, who ruled Indonesia for 32 years, was forced out by mass riots in May 1998.

It was only last year that the country held its first democratic general election in four decades, a change in leadership that prompted Singapore Prime Minister Goh Chok Tong to call on his country to lead the way in bringing investment back to Indonesia.

During a visit to Jakarta in January, Goh said he wanted Singaporean government-linked companies to buy $500 million worth of minority stakes in dozens of bankrupt companies. Their planned sale by the Indonesian Bank Restructuring Agency is regarded as central to economic recovery efforts ordered by the International Monetary Fund.

Goh also said Singapore would lend money to private Singaporean companies seeking to invest in Indonesia. The government has said it would make $235 million available.

In 1996, the total value of approved Singaporean investment in Indonesia was $11.5 billion, according to Standard and Chartered Bank. Last year, Singaporeans applied to invest $731 million in Indonesia.

Analysts say Goh's support for Indonesia's new government headed by Indonesian President Abdurrahman Wahid isn't enough in itself to calm nervous private investors.

The Indonesian president, more popularly called Gus Dur at home, has promised far-reaching reforms, including a crackdown on corruption. He has also traveled the world trying to drum up investment. Still, investors in Singapore - one of Indonesia's closest neighbors - have been reluctant.

Indonesia remains plagued by unrest. After East Timorese voted overwhelmingly for independence in an Aug. 30 UN-sponsored ballot, Indonesia withdrew from the half-island territory.

But after the announcement of the vote, militia gangs, backed by the Indonesian military, went on a violent rampage, murdering hundreds of people and destroying most of the territory's buildings and other infrastructure.

Since then, other separatists on the Indonesian island of Sumatra have rallied for independence. And only days after Goh's January visit to Jakarta, villagers, upset by a land dispute and armed with spears and machetes, overran Singaporean-owned tourist resorts and factories on Indonesia's Bintan Island, just 40 kilometers (25 miles) east of Singapore.

"The reform process so far has been aimed at crisis management. Investors will want to see more," said Andrew Fung, treasury economist at Standard and Chartered Bank in Singapore.

Fung said investors welcome an overhaul of the court system, a notorious haven for corruption, and other institutions. But they remain concerned about political instability and social unrest, he said.

"The political situation in Indonesia, although greatly improved with a legitimate president, still remains complicated," said Lee Kuan Yew, Singapore's patriarch and former prime minister.

Even so, Lee says Singapore must help. "It is in the interests of regional stability that Indonesia restores its political balance and stability," Lee said.