Aceh opens new office to attract investors

Andi Haswidi, The Jakarta Post, Aceh

The Nangroe Aceh Darussalam provincial government has stepped up its efforts to strengthen the region's fragile economy by launching an "Investor Outreach Office" (IOO) on Monday to attract foreign investors.

"We are now officially open for business and are opening our doors to investment for the benefit and welfare of the people of Aceh," Deputy Governor Muhammad Nazar said during the ceremony to mark to launching of the IOO.

Nazar said that until recently Aceh had been focusing on rehabilitating the region following the long period of civil unrest, and the 2004 tsunami disaster. However, the province was now aiming for more sustainable economic development through cooperation with both local and overseas firms.

The IOO's main functions would be to generate investment, to provide a one-stop information service, business matchmaking assistance, assistance with regulatory requirements and aftercare service to investors, and to play a policy-advocacy role.

Apart from the provincial government, the creation of the IOO also involved other agencies, including the Aceh and Nias Rehabilitation and Reconstruction Agency (BRR), Aceh Investment Coordinating Board (BKPMD) and the World Bank's private sector development arm, the International Finance Corporation (IFC).

In its operations, the IOO would collaborate closely with the BKPMD, Aceh Chamber of Commerce and other institutions, both domestic and foreign, with information on the IOO available online at www.investinaceh.org.

IFC business enabling operations officer Greg Elms said that the IFC had already started to put Aceh on the investor interest map.

"Aceh's IOO is truly the first of its kind anywhere in Indonesia. The secret of this model is the marriage of a government mandate to increase investment, together with sales, marketing and customer-service expertise from the private sector," he explained.

He added that the IFC's cumulative investment in Indonesia had reached US$2.3 billion for 84 projects over 35 years. New commitments were currently averaging $250 million per year.

During its launching ceremony, the IOO signed seven memorandums of understanding on cooperation and promotion programs with the British Chamber of Commerce, Germany's EKONID, the European Chamber of Commerce, the Canadian Chamber of Commerce, the Netherlands' INA, Malaysia's MCJ and Norway's NIA.

The IOO also signed an agreement with Australia's THP Group, which promised to secure 2 Australian investments involving a total of US$3 million.

As part of its promotional program, the IOO together with other relevant institutions will host the Aceh Merchants Seminar in May and June, and the first-ever Aceh Investment Summit later this year.

Following the tsunami disaster, there have been large inflows of foreign funds in the form of aid to rehabilitate infrastructure and other assets. An IFC study found that about 78 percent of the losses were suffered by the private sector.

In April 2005, the BRR was established as the authority responsible for carrying out the rehabilitation work, and is expected to complete its mandate in April 2009. The BRR is responsible for managing a total of between Rp 60 trillion and Rp 80 trillion in rehabilitation funds, with about Rp 21 trillion provided by the national budget, and the rest by mostly overseas donors. For this year, total BRR spending is expected to amount to about Rp 23.5 trillion.

Concerns have been voiced that the province has become too dependent on massive inflows of foreign aid, and that a sudden halt to this could severely impact on its weak economy.

Speaking to The Jakarta Post earlier, BRR deputy for economics and business Said Faisal Baabud said that the BRR would focus in 2007 on strengthening the social economy through increased investment in projects that would increase the value of Acehese products in various sectors, particularly the agricultural and fisheries sectors. This would involve collaboration with local and foreign investors so that the province could lessen its dependence on other provinces and on foreign aid.

"Aceh's experience in interacting with the international community is one of its strongest assets, which will help a great deal in the endeavor," he said.
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