From The Jakarta Post

Over $1b in new investment approved in January

Rendi Akhmad Witular, The Jakarta Post, Jakarta

The prospect of a prolonged economic slowdown has not deterred nine local and overseas firms from proposing new investment plans worth over US$1 billion to the government, a senior official says.

The Investment Coordinating Board (BKPM) approved their investment plans in January, raising hopes, at least for BKPM chairman Muhammad Lutfi, that the recovery in the corporate sector will be faster than many had expected.

"Between January and February alone we approved several major investment projects worth hundreds of millions of dollars each. This shows that the business community still has confidence in us," said Lutfi after meeting President Susilo Bambang Yudhoyono on Tuesday.

Lutfi said the agency was predicting that investment -- both domestic and foreign -- would grow by 21 percent this year to Rp 139 trillion ($14.94 billion) from Rp 115 trillion last year.

These investments would create 470,000 new jobs, compared to the 280,000 jobs created by investors last year.

The BKPM estimate excludes investments in the oil, gas and mining industries, banks and non-bank financial institutions, and the capital markets as these are regulated by other agencies.

Realized foreign direct investment (FDI) from January to December last year nearly doubled to $8.91 billion (909 projects) from $4.6 billion (544 projects) during the same period in 2004.

Despite signs of increasing investment, Lutfi warned that the trend could be derailed if electricity prices were increased as this would further burden the business community.

"A decision to invest depends on two factors; cost and risk. The country has no problem now with risks but it is still has a lot to do to reduce the costs of doing business, especially if there is to be an increase in power prices," said Lutfi.

He said that a number of investors had put their plans on hold as they recalculated the likely cost of doing business here following the proposed power price hikes. However, there were no indications thus far that they would cancel their investment plans.

Indonesia has been struggling to lure back foreign investment, which reached a peak of $39.66 billion in 1995, but then collapsed to $13.64 billion immediately following the 1997-1998 Asian financial crisis.

The government has vowed to curb corruption and red tape, promote legal certainty and improve the country's infrastructure in order to boost the business climate and thereby attract investors.

However, the country faces a grave threat this year from instability in the macroeconomic sector as the effects of last year's economic problems, triggered by rising fuel prices, prove to be more persistent than expected.
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