S'pore keeps neighborly with RI investment

Kornelius Purba The Jakarta Post Jakarta

Tiny but wealthy Singapore wields its financial might in the region, including in investment in Indonesia. The city state is the third largest foreign investor in the country after Malaysia and Saudi Arabia. In 2001, Singapore companies were involved in 154 projects with investment value worth US$1.139 million. Singapore has been one of the top six foreign investors in Indonesia for the last five years. In terms of value, however, it dropped significantly in the same period (with the exception of the year 2000) in tandem with the slump in overall foreign investment in Indonesia. President of the Singapore Association in Indonesia (SAI) Peter Chao said Indonesia remained an important site for investment. Although investors face great challenges in the short term, the country was bound to become attractive again for medium to long-term investment due to its large population and rich natural resources, among other draws. "Indonesia is very diversified not only in culture but also in resources," said Chao, whose own company operates in the furniture business. Of the 154 projects, 124 are new ones while the remaining 30 underwent a change in status from domestic to foreign owned. Although new projects represents 80.5 percent, the total value of all new projects only makes up 15.6 percent of the total investment value. Only eight projects were worth more than $5 million. For new foreign owned (PMA) projects, 40 percent are in services, like contractors in the oil and gas industry, consultancies, freight forwarders, as well as food and beverages. According to Chao, 36.3 percent (33 projects) of the new projects are located in Batam, which is strategically located only a few kilometers from Singapore. The next favorite destinations are West Java and Jakarta, absorbing a 24.7 percent of new projects worth $43.98 million. Bintan island, another neighbor of Singapore, ranks third, with eight projects there worth $38.61 percent. According to SAI data, the investment data trend line behaves inversely to the number of projects trend line. When investment performance deteriorated during the economic crisis from 1997 to 2001, the average project size shrunk. The number of projects increased but, conversely, when investment performance showed an upward trend in 2000, the average project size increased but the number of projects decreased. "When sentiments were down, there were less big-item projects, but many more small ones, whereas when sentiments were up, there were slightly more big projects, but fewer small ones," said Chao. He warned that the investment map had changed in recent years, and there was no room for complacency in securing investment dollars. "Indonesia is facing great challenges in the severe competition with other countries for foreign direct investment." The former diplomat said the implementation of regional autonomy tended to increase costs for foreign companies, because provincial authorities and regencies often impose levies on foreign companies in addition to those exacted by the central government. "It also takes a longer time to process investment permits now. You also have to deal with more people," he said. Chao urged the government to embark on comprehensive investment policies because the country's attractiveness to foreign investors was almost lost. "You have the future but you must work harder now," said Chao. 1