Investment From Overseas Tipped To Plummet 58%

By webadmin on 09:43 pm Jul 02, 2009
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Muhamad Al Azhari & Dion Bisara

Finance Minister Sri Mulyani Indrawati has forecast that foreign direct investment for 2009 will be $6.2 billion, less than half of last year’s total of $14.87 billion, as companies remain cautious about expansion plans amid the global downturn.

“Overall investment in 2009 will be supported by [foreign direct investment] to the tune of $4.5 billion in the first half, but this will drop to $1.7 billion in the second half,” Sri Mulyani told a hearing at the House of Representatives on Thursday.

“Investment indicators have not shown any improvement in this quarter. There are signs of stability but no signs of recovery yet,” she said, adding that “companies are being more careful.”

Last year, the country recorded total actual direct investment — domestic and foreign — of Rp 154 trillion ($17.13 billion), 20 percent higher than in 2007, data from the Web site of the Investment Coordinating Board (BKPM) said.

In May, the BKPM lowered its forecast for growth in combined foreign and local direct investment this year to 9 percent from 11 percent because of tight liquidity resulting from the global financial crisis.

BKPM Chairman Muhammad Lutfi said the board had cut its forecast after investment inflows in April proved disappointing compared with last year.

According to BKPM data, the rate of foreign direct investment fell 4.1 percent in April year-on-year to $1.4 billion from $1.46 billion.

The transportation, warehousing and communications sectors led the way, attracting $1.21 billion in investment.

Foreign direct investment grew by 43.8 percent in 2008 compared to a year earlier, and accounted for more than 80 percent of total investment last year.

MS Hidayat, the chairman of the Indonesian Chamber of Commerce and Industry (Kadin), was quoted by Detikfinance on Thursday as saying foreign direct investment was likely to fall as much as 33 percent this year because international investors had grown wary of investing in new projects, especially overseas.

“It looks like foreign investors are opting for short-term investments in Indonesia, such as in bonds, equities and sukuk [Islamic bonds],” he said.

Hidayat also said he was pessimistic that the government’s Rp 73.3 trillion economic stimulus package would improve the investment climate, especially among foreign players, given the fundamental state of the global economy.