Novia D. Rulistia, Jakarta – Domestic investment in the January-May period dropped by 68.3 percent from a year earlier because of uncertainty before and after the fuel price rises, the Investment Coordinating Board (BKPM) says.
Domestic investment in the first five months declined to US$660 million from $2.07 billion in the same period last year.
"I expect the investment slowdown for 2007 commitments will continue in the next six to nine months as investors are still recalculating their investment plans in line with the increased fuel price," BKPM head M. Lutfi said Monday.
He was speaking during a hearing with the House of Representatives Commission VI overseeing trade, industry and investment affairs.
But Lutfi said the 2005 fuel price rises showed the slowdown could be managed, especially as the oil phenomenon was also hurting other national economies.
The government raised fuel prices twice in 2005, resulting in a 30 percent drop in the value of investment in 2006. But investment started to pick up again in 2007, reaching three times the amount of investment in 2005, Lutfi said.
"Judging from this experience, investment will recover in 2009 even though there are general elections ahead," he said.
Overall, total investment in the first five months rose 80.9 percent to $10.44 billion from $5.77 billion in the same period of 2007, mostly generated by foreign investment, which accounted for $9.78 billion, up from $3.7 billion a year earlier.
According to the BKPM, domestic investment between January and May mostly went to food-related sectors with a total investment of Rp 2.43 trillion, followed by the metal, machinery and electronics industries with Rp 1.49 trillion.
By location, Banten received the most, taking in investment to the value of Rp 1.41 billion, followed by West Java with Rp 1.1 billion, East Java with Rp 663 million, Lampung with Rp 650 million and Greater Jakarta with Rp 531.5 million.
Foreign investment mostly went into the telecommunications and transportation sectors to the value of $6.54 million, followed by the metal, machinery and electronic industries with $499 million.
"Investors invested mainly in telecommunications as it is considered attractive because of Indonesia's huge population and rapid growth in the sector," Lutfi said.
During the January-May period, Mauritius became Indonesia's largest foreign investor with $6.48 billion of investment, followed by Japan with $827 million, Singapore with $600 million, Malaysia with $228.5 million and Germany with $151.4 million.