Regional News
Bali. The government is sticking to its projection that realized investment growth in the country will be steady at 15 percent next year despite concerns that the euro zone debt crisis will disrupt capital inflow to the region.
Total investment — including foreign and domestic direct investment — is expected to reach $26.5 billion next year, said Gita Wirjawan, the trade minister who is also the head of the Investment Coordinating Board (BKPM). For this year, the board had predicted investment to grow 15 percent to $23 billion.
“Yes, I think there is concern about the euro zone. But next year I think we can still grow by 15 percent,” Gita said on the sidelines of the Asean Investment Forum in Nusa Dua, Bali.
“We are still comfortable about how attractive Indonesian businesses are,” he said, adding that he was optimistic that there were still many investors looking to invest in the country.
Gita, a former investment banker who has worked for Goldman Sachs and JPMorgan Chase, was referring to President Susilo Bambang Yudhoyono’s optimism that Southeast Asia’s largest economy could grow by 6.6 percent on average through the rest of his term which ends in 2014. The government forecasts the economy to expand 6.5 percent this year after growing 6.1 percent in 2010.
The board said last month that investment in the January-September period was Rp 181 trillion ($20.1 billion), which according to the BKPM represented 75.4 percent of the target it expected to meet for 2011. Foreign direct investment (FDI) comprised 70 percent of that figure.
But Paul Donovan, the managing director of global economics at UBS Investment Bank, had a different view. He said the European debt crisis could cause FDI from there into emerging markets to shrink.
“The crisis would likely encourage what we called home-country bias, that an investor would only invest in the country that they already know,” he said. “Ultimately I think there is a risk, not that FDI is pulled out, but that the flow over time will shrink.”
Donovan asserted that such trends had nothing to do with Indonesia’s economic performance or investment climate. “This has to do with the global environment,” Donovan said.
Indonesia’s steady economic growth has boosted the number of middle-income earners in a country with a population of more than 240 million, making it an attractive market for foreign investors looking to expand their businesses. The nation’s rich supply of natural resources has also attracted a large amount of investment.
However, Indonesia’s ailing infrastructure, especially in the power sector, has been a major detriment in bringing in investment and in compete with neighboring nations such as Malaysia, Thailand and Vietnam for foreign money.
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By: Dion Bisara
Source: Jakarta Globe, Nov. 16, 2011
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