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Indonesia 'could lose $8.4 b in investments'

Straits Times - January 13, 1999

Jakarta – Indonesia could lose US$5 billion in foreign investment due to political and security problems, Investment Minister Hamzah Haz was quoted as saying yesterday.

The Bisnis Indonesia daily reported that around US$5 billion in foreign investment approved last year had shown no signs of being invested. "If there is no sign of project realisation until early next year, the investment letters would be cancelled," Mr Hamzah said.

He said investors were concerned about Indonesian political stability and security problems, so many chose to stay on the sidelines and postpone their projects. He added that the riots and unrest that have rocked Indonesia for several months had added to pressure on investors to halt their projects.

Indonesia faces mounting unrest and crime as a devastating economic crisis pushes millions into unemployment and deepening poverty. Meanwhile, The Asian Wall Street Journal yesterday reported that the uncertain economic and political outlook in Indonesia was making foreign companies nervous about making further investments crucial to helping to revive the country's crippled economy.

The paper said a report released on Monday noted that escalating social unrest, over-optimistic government economic forecasts and eroding confidence in the government itself were among key concerns cited by chief executives and senior financial officers of foreign joint-venture companies as major obstacles to investment.

The report's results were based on a survey conducted by Sydney-based Indonesian Global Advisors of the attitudes and outlook for 1999 of foreign joint-venture partners operating in Indonesia. Foreign joint-ventures involve an international company in partnership with an Indonesian firm.

The survey is based on interviews of chief executive officers and chief financial officers from 28 companies interviewed in the last week of November, the paper said. The findings add to what many already know: that foreign confidence in the prospects for Indonesia's economy has virtually disappeared.

Indonesian Global Advisors added that the two clients who commissioned the survey had decided against pursuing an acquisition in Indonesia for the foreseeable future.