FOREIGN INVESTMENT IN RI EXPECTED TO INCREASE

Andi Abdussalam

Jakarta, June 29 (ANTARA) - Foreign investment in Indonesia is expected to increase in the next few years as conditions for doing business in the country continue to improve  and its economic growth is expected  by many quarters to reach up to seven percent next year.          "Foreign investors, particularly from the United States and European countries, are optimistic about their investments in  Asian countries, Indonesia in particular," money market analyst Farial Anwar said on Monday.          Foreign investment in the domestic market would increase in the face of the upward trend in the country's economic growth which is expected to reach seven percent, said Farial who is also director of the Currency Management Group.          "We believe  the government is  moving towards that end so that the national economy will grow well," he said.          Yet, foreign capital which entered the domestic market so far was only invested in the financial market, such as stocks market, money market and Bank Indonesia (BI/the central bank)'s instruments.          Therefore, the government should be able to attract foreign investors to make their investment in the long-term or real sector such the establishment of factories that would offer jobs and incomes to the people, he said.          Virtually all foreign investors are  only interested in  port-folio investment but not in  direct investment in the real sector. According to Investment Coordinating Board (BKPM) chief Gito Wirjawan, billions of dollars of foreign investment will flow into Indonesia in the coming two or three years.          "Indonesia has won concrete commitment from foreign investors. Billions of dollars will flow into Indonesia in the next two to three years," Gito said during the World Economic Forum here recently.          He said that foreign investment commitment and realization turned out to be increasing over the past few years. Indonesia recorded an increase of 55 percent investment growth, and in the first quarter of this year it  reached 27 percent.          In 2010, foreign investment inflows reached Rp148 trillion, a 52 percent increase compared to Rp97.4 trillion the year before.          The Investment Coordinating Board (BKPM) has set itself the target of luring Rp240 trillion in  investment this year, up 15 percent of the realized investment of Rp208.5 trillion last year.          "We will achieve the 2011 investment target by improving policies related to investment, providing better services, granting fiscal facilities, and accelerating development of infrastructure, " Gita Wirjawan said.          Investment is expected to continue to rise this year after growing significantly by 54.2 percent to Rp208.5 trillion from Rp135.2 trillion in 2010.       The 2011 investment climate would largely depend on the domestic political and economic conditions which had of late been very conducive.          BKPM?s Regional Director II Yuliot recently expressed optimism that the 2011 investment target could be achieved due among others to the government's policy to provide investors with tax holiday facilities under Government Regulation No. 94 of 2010.          As regard to this year's investment, BKPM deputy for investment control M. M. Azhar Lubis said up the first quarter of this year Indonesia had recorded an investment value of Rp53 trillion. In the second quarter of 2011, it predicted a figure of Rp60 trillion.          He said that the Rp60 trillion which was composed of domestic and foreign investment, increased from Rp53 trillion in the first quarter of 2011.          "We predict the total investment in the second quarter of 2011 at Rp60 trillion, higher than that of the first quarter," Azhar Lubis said.          He said that the increase in the investment would depend on how far is the government's ability to develop infrastructure and the development of down-stream mining as well as crude palm oil products.          In addition, the plan to improve infrastructures all over the country and to step up one-stop services is expected to boost investment this year, he said.          Investors, particularly foreign ones,  have great interests to invest in the country as reflected by the upward trend in foreign investment inflows.          According Farial Anwar, Indonesia has the chance to boost its economic growth to seven percent, and thus attract foreign investment, though currently it is only supported by the consumption sector, not by the industrial sector which showed less qualitative growth.          Farial pointed out various other factors that would boost the growth of foreign investment in Indonesia.          China's policy which is tightening its liquidity to slow down its fast economic growth is one of the factors that would encourage foreign investors to choose Indonesia's domestic market.          Beijing feared that it would generate big inflation if it provided credits in large amounts. Therefore, it was tightening its liquidity to slow down its economic growth, he said.          Apart from that, Indonesia also could take advantage of the slow economic growth in the United States.          Foreign investors are still unwilling to enter the United States market which still adopts low interest policy and the European markets which are now being plagued by debt crises.          Therefore, the Asian markets are seen as the prime mover of the world economic growth, regardless of the fact that Japan after two quarters had not yet experienced improved economic growth, he said. ***5*** (T.A014/A/HAJM/13:30/A/O001) 29-06-2011 13:30: