Foreign Investment Plunges Sharply
Wednesday, 06 December, 2006 | 14:48 WIB

TEMPO Interactive, Jakarta: The amount of foreign and domestic investment from January to November 2006 plunged sharply compared to the same period last year.

Based on Investment Coordinating Board (BKPM) data, the foreign investment amount was US$4.69 billion, a drop of 45.9 percent compared to the same period last year. While the local investment amount was only Rp16.9 trillion, a drop of 37.1 percent compared to 2005.

According to BKPM Chairman Mohammad Luthfi, the plunge of foreign and domestic investment is due to the effect of the fuel oil price hike in October 2005. The hike also caused the rise of production costs. “This burdens would-be investors ,” he said during the hearing with the House of Representatives (DPR) Commission for Trade and Industry in Jakarta, yesterday (5/12).


The electricity crisis or electrical supply deficit which occurred in ten areas, he said, also affected those wishing to invest in Indonesia. The areas include Sumatra, Kalimantan, Sulawesi and Papua. The gas supply crisis in West and East Java also sustains investment activity expansion.

He said several labor matters and tax issues became impediments for investors. The result, investment commitment in 2004 and 2005 dropped when compared to in 2003. “The effect is investment in 2006 also dropped.”

Many kinds of infrastructure and legal certainty matters also influenced investment . “If there is no improvement soon, next year it (investment) can drop even more sharply,” said Luthfi.

However, he is still optimistic that foreign and local investment will not significantly affect economic growth. From the macro-economy aspect, the growth decrease is only around 0.9 percent.

On the other hand, Deputy Chairman of Trade Commission, Lili Asdjudiredja, is concerned that the decrease of foreign and domestic investment will greatly affect national economic growth. “By the current investment trend, I predict that the economic growth target of 5.8 percent will not be reached,” she told Tempo yesterday.

RR Ariyani