Value of foreign investment deals up 13 percent

JAKARTA (JP): The value of foreign investment approvals rose by 13 percent to US$33.8 billion this year, State Minister of Investment Sanyoto Sastrowardoyo said yesterday.

Sanyoto said the number of projects approved for foreign investors this year, however, declined by 11.4 percent to 790 projects.

The value of domestic investment approvals also increased this year by 19.1 percent to Rp 119.9 trillion. There were 718 projects approved, down from 810 projects in 1996, he said.

Last year, the value of foreign investment approvals fell by about 25 percent while the value of domestic investment approvals increased by 44 percent.

Sanyoto, who is also chairman of the Investment Coordinating Board, said most of this year's foreign investment approvals came from Britain, which had committed to 31 projects totaling $5.5 billion.

"Britain took over Japan's place last year as the largest foreign investor in Indonesia this year," he said.

Britain is followed by Japan, which invested in 94 projects worth $5.4 billion. Direct investment from Germany totaled $3.5 billion, Taiwan $3.4 billion and Malaysia $2.3 billion.

Sanyoto said chemical industries remained the most attractive sector to foreign investors this year, with approvals in the sector totaling 93 projects worth $12.3 billion.

Transportation followed with 36 project approvals totaling $5.9 billion.

Investors also focused on pulp and paper projects worth $5.3 billion, metal industries $2.3 billion, and electricity, gas and drinking water $1.8 billion.

Sanyoto said local investors were also attracted to chemical industries this year. They had committed to 68 projects totaling Rp 22.4 trillion, he said.

Agribusiness totaled Rp 13.3 trillion, the food industry Rp 13 trillion, and paper and nonmetal minerals Rp 11.6 trillion.

Foreign investment approvals for export-oriented projects grew 17.3 percent to $11.5 billion, with the number of projects declining to 402 from 520 projects in 1996.

Local investment approvals for export-oriented industries grew 35.8 percent to $20.1 billion, with the number of projects falling 10.7 percent to 242.

Sanyoto said his office had estimated that about 53.44 percent of foreign investment approved in 1994 had been realized this year, totaling $27.3 billion.

He estimated 47.96 percent of local investment approved in 1994 had also been realized this year, amounting to Rp 53.3 trillion.

"Assuming that investment commitments are realized within three years, the value of realized local and foreign investment this year totaled about Rp 62 trillion," he said.

The amount was based on the value of the U.S. dollar in June when it was Rp 2,500. The dollar's value has risen to about Rp 5,000 since then.

Cancellation

Sanyoto said 143 projects which had already been approved were canceled this year.

This was made up of foreign investment worth $1.7 billion and local investment worth Rp 3.9 trillion, he said.

Nine projects canceled by foreign investors were in textiles worth $647.5 million, nine in hotel projects worth $521.7 million and a mining project worth $335.1 million, he said.

Local investors canceled 13 chemical projects worth Rp 2.3 trillion, eight agribusiness projects worth Rp 521.7 billion, and eight hotel projects worth Rp 414.5 billion.

He said cancellations were mostly due to financial difficulties, poor networking and marketing access, inadequate technology application and insufficient infrastructure.

Overall, the ministry predicted that foreign and local investment approved this year would absorb about 1.69 million people into the labor force, a 17 percent drop from last year.

Sanyoto said he was optimistic that direct foreign investment would remain bright next year.

"I am confident the monetary crisis will gradually come to an end because of our sound economic fundamentals," he said.

The confidence in Indonesia's economic potential by foreign investors from the United States, Japan, and Britain would remain positive, he said.

The government would also continue to improve the investment climate in the country, he said.

This included the recent measure to grant a two-year extension to local and foreign investors facing difficulties in starting projects on time.

Investors who are granted permits to set up projects are normally required to start projects within three years.

Sanyoto said no investors had asked for the two-year extension yet.

He said the government would also provide tax holidays to investors for six to 10 years if they were involved in certain business sectors.

The minister said at least six projects had been proposed to the President to receive the tax incentives. (das)

Table A: Foreign and domestic investment

1993 1994 1995 1996 1997

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Domestic investment:

Number of projects 548 823 775 810 718

Investment value (Rp trillion) 39.4 53.3 69.9 100.7 119.9

Foreign Investment:

Number of projects 330 451 799 959 790

Investment value (US$ billion) 8.1 27.3 39.9 29.9 33.8

Table B: Top foreign investors

1997 Cumulative 1967/1968 - 1997 ---------------------------------------------------------------------- No. Country Projects Investment Country Projects Investment

(US$ billion) (US$ billion) ---------------------------------------------------------------------- 1. Britain 31 5.5 Japan 1004 41.4 2. Japan 94 5.4 Britain 236 32.3 3. Germany 15 4.5 Hong Kong 368 18.7 4. Taiwan 101 3.4 Singapore 706 18.5 5. Malaysia 59 2.3 United States 289 14.5

Source: BKPM