Indonesia welcomes foreign investment in petrochemical industry

Muhammad Lutfi, chairman of Indonesia's Investing Coordinating Board, said here Monday that foreign investors would be particularly welcome in the area of downstream value-adding derivatives in the petrochemical industry.

He made the announcement on the sideline of World Economic Forum on East Asia which opened Sunday in Singapore. The two-day meeting, under the theme "The Leadership Imperative for an Asian Century," brought together over 300 business, government and civil society leaders from 26 countries to discuss the current challenges facing East Asia.

Lutfi said Indonesia would be among the most progressive countries in the region for foreign investors.

The government was committed to a program of developing 42 derivative industries providing downstream value-added products in the petrochemical sector, said Lutfi.

"Indonesians have been famous for being petty traders in the past. We don't want that any more. Out of the derivative industries we can create big, small, and medium size companies and create 1.15 million new jobs," he added.

The Indonesian official also listed areas in which foreign investment will be subject to restrictions: Armaments and high-polluting industries; The transportation sector, in which Indonesia retains the right of cabotage and in which foreign investment will be capped at a maximum stake holding of 49 percent; Mining; and Broadcasting companies with foreign investment capped at 20 percent.

To achieve the targeted economic growth of 6.6 percent per year over the next three years and thereby reduce unemployment from current levels of 9.7 percent to 5.5 percent and the number of people living below the poverty line from 36 million to 17 million, Lutfi said that Indonesia would require investments totaling some 426 billion U.S. dollars.

The government will provide around 72.4 billion U.S. dollars of this investment bill, leaving a targeted contribution of 358.8 billion U.S. dollars from the private sector (both domestic and foreign), Lutfi said.

The infrastructure bill would account for an estimated 123 billion U.S. dollars of the total, he added, with the government contribution set at 24 billion U.S. dollars.

Lutfi also noted that reforms introduced by the new government in Indonesia have so far delivered results which captured in sustained high economic growth (which continued to beat all expectations and came out at 6.6 percent in the first quarter of 2007); the accumulation of reserves now totaling 50.1 billion U.S. dollars; and an effective campaign against inflation which is down to just 1.4 percent in the period January to May this year; interest rates have meanwhile fallen from 12 percent in 2005 to 8.5 percent at present.
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