JAKARTA, 15 July 2004 - Foreign direct investment in Indonesia fell by almost 35 percent in the first half of the year, underscoring the troubles facing the country's economy, the government said Wednesday. The country's official investment board did not provide any reason for the drop to US$3.05 billion from US$4.65 billion invested over the same period last year.
But foreign businesspeople have long complained that the country's corrupt judicial system and lingering security concerns make investing here unattractive. "Indonesia finds itself with problems over the law and taxation," said John Arnold, chairman of the British Chamber of Commerce in Indonesia. "It needs to be seen as addressing these issues in a systematic manner so that potential investors can see a road map."
Analysts said that the drop in investment will likely prevent the Indonesian economy from growing beyond its current rate of 5 percent, far short of the pace needed to put a dent in the country's double-digit unemployment. In a related development, the government said it was optimistic it will reach its target of raising 5 trillion rupiah (US$555 million) this year from sales of stakes in state-owned companies.
Deputy State Enterprises Minister Mahmuddin Yasin said that 3.4 trillion rupiah (US$378 million) had been raised this year from sales in the privatization program. The proceeds will be used to help finance the state budget deficit. The government hopes to sell a 30 percent stake in PT Bank Negara Indonesia and a 14 percent stake each in tin miner PT Timah and sister company gold and nickel miner PT Aneka Tambang.
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