Jakarta Pushes Investment

January 13, 1994

With investments reaching $1.2 billion, Singapore ranks as Indonesia's biggest foreign investor, according to Sanyoto Sastrowardoyo, minister for investments in Jakarta. Total foreign investments in Indonesia were $7.5 billion at the end of 1993, down 30 percent, or approximately $3 billion, from the $10.3 billion in 1992.

One reason for the decline was a drop in investments from Japan.

From 1957 through September 1993, Japan was involved in 555 investment projects in Indonesia, totaling $13.56 billion. In 1992, there were 48 Japanese investment projects in Indonesia totaling $1.5 billion. That dropped sharply in 1993, with 38 projects at a cost of $496 million.

Japanese investment in Indonesia has declined because small- and medium-sized Japanese companies are having difficulty obtaining bank credit, according to the Japan External Trade Organization (JETRO) in Tokyo. Japanese banks have become more selective about giving loans, a Jetro official was quoted as saying by Indonesian investment sources.

Major Japanese companies are now turning to mainland China for their foreign investments. In 1992, Japanese investments in China increased 84.4 percent from the previous year.

But Mr. Sanyoto says he is optimistic that foreign investments in Indonesia will be bigger in 1994 than 1993.

``Indonesia is on the move to become Asia's next big growth market,'' says Roeslan Abdulgani, quoting Fortune magazine. Mr. Abdulgani is a prominent observer of foreign affairs in Jakarta.

To attract more foreign capital, Sanyoto advocates lowering interest rates, improving infrastructure, and upgrading worker training.

Obstacles to foreign investment include the absence of a tax holiday for investors and a requirement that shares in foreign investments be sold to Indonesians, Sanyoto holds.

Sanyoto seems to have reason for his optimistic outlook for 1994. Last October, his office received 46 requests for foreign investment projects for 1994. The projects total $994 million. In November, the minister's office approved another 60 foreign investment projects, at a total value of $581 million. These requests followed an announcement of deregulation measures in October.

Singapore, Taiwan, South Korea, and Hong Kong remain the principal countries interested in investment opportunities in Indonesia.

In contrast to the flow of foreign capital, domestic investments in Indonesia showed an upward trend in 1993.

In 1992, total domestic investments reached 29 trillion Indonesian rupiahs ($15 billion). This figure is expected to have reached 33 trillion rupiahs ($16.5 billion) by the end of 1993.