Investment bounces back in first quarter

Urip Hudiono, The Jakarta Post, Jakarta

Indonesia's efforts to attract more investment finally appear to be on the right track, with the latest figures for both realized investment and investment approvals during the first quarter bouncing back from last year's slump.

Actual foreign direct investment as of the end of March was up 15 percent at US$2.99 billion from the same period last year, the Investment Coordinating Board (BKPM) reported Wednesday, marking a return by overseas investors to Indonesia after their previous wait-and-see approach pending improvements to the country's investment climate.

Local investors showed even more enthusiasm, with realized domestic investment increasing by 60 percent to Rp 13.68 trillion ($1.52 billion).

In total, realized foreign and domestic investment during the first three months of the year rose 27 percent to Rp 40.59 trillion, or already almost half of the Rp 83.08 trillion target for this year. The investment projects have already provided jobs for 75,251 workers.

Regarding investment approvals, the BKPM noted a nearly sixfold increase in FDI approvals to $14.13 billion, while domestic investment approvals increased fourfold to Rp 77.15 trillion.

Investment approvals give a picture of investor interest and confidence, and should ensure sustainable investment growth prospects ahead as the commitments are realized.

Sectorwise, investors showed greatest interest in Indonesia's chemical and pharmaceutical, pulp and paper, and processed food industries, with investors from the UK, Taiwan and Australia coming first, second and third, respectively, in realizing their investment approvals.

Among the most significant FDI projects realized was PT Trans-Pacific Petrochemical's $1.3 billion plant in Tuban, East Java, while domestic investment projects included PT Lontar Papyrus Pulp and Paper's Rp 3.79 trillion plant in Jambi.

Approved FDI projects in the pipeline include an oil refinery to be developed by PT Kilang Minyak Intan Nusantara at a cost of $4.4 billion in Batam, Riau Islands.

The BKPM figures exclude investments in the financial services industry and the capital markets, which are the responsibilities of other government agencies.

"Investment has returned to the sound levels of previous years, and we expect it to continue strengthening with more quality investment projects coming onstream so as to help spur higher economic growth," BKPM director M. Lutfi told a media conference.

The government is pinning its hopes on more investment to drive growth, having recently successfully steered the new Investment Law, which contains various incentives for investors, through the House of Representatives. The government has also been working closely with the central bank to encourage more lending, and has embarked on a drive to eliminate unnecessary red tape and improve the country's infrastructure.

Realized FDI fell by nearly a third to $5.97 billion last year, while domestic investment dropped 32 percent to Rp 20.78 trillion. Total investment grew by only 2.9 percent, resulting in 2006 growth coming in at a less-than-expected 5.5 percent.

Actual FDI during the first quarter of 2005 stood at $2.01 billion, while domestic investment amounted to Rp 4.54 trillion.

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