Jakarta – Indonesia's foreign direct investment approvals dived to $2.67 billion in the first seven months of 2002 from $5.55 billion in the same period last year, government figures showed on Tuesday. The drop was in line with analysts' expectations.

State investment agency BKPM said in a report the biggest investment approvals for this year – worth $564.6 million – were in the transportation, warehousing and telecommunications sectors.

The potential export value arising from the proposed total investments submitted during the period was $2.56 billion compared with total annual exports of some $55 billion.

BKPM also said domestic direct investment approvals fell to 13.7 trillion rupiah ($1.5 billion) in the 2002 period compared with 43.8 trillion rupiah in the year ago period. Investors reduced their exposure to Indonesia after the country plunged into political and economic turmoil in the late 1990s and have remained wary ever since.

Analysts have said improving the investment climate was critical as it would not be sustainable for the country, hard hit by the Asian financial crisis of the late 1990s, to continue relying too heavily on domestic consumption, currently the main factor driving economic growth.

Indonesia's economy grew 3.32 percent last year and the state budget forecasts growth of four percent in 2002 and five percent next year, but many economists say the country may fail to meet the targets as long as investment remained weak.

Indonesia's economy needed to expand at least six to seven percent annually to be able to provide revenue to pay off old debt and avoid the need to seek more help from creditors to stay afloat, economists have said.

The combined foreign and domestic debt stands at some $150 billion, almost equal to gross domestic product.