Indonesian government warned to be selective of investment

Indonesian government warned to be selective of investment

Photo document of FDI project in Muara Angke, Jakarta. (ANTARA/Fanny Octavianus)

"This is already reflected in the country`s trade balance."
Jakarta (ANTARA News) - The Institute for Development of Economics and Finance (Indef) warned the Indonesian government not to be carried away by high growth of foreign investment in the country.

The government needs to be selective in approving foreign investment that could increase imports instead of reducing dependence on imports, Enny Sri Hartati, the director of the economic think tank said.

Enny said a 30 percent growth of foreign direct investment (FID) in 2011 would not contribute to the process of industrialization and help reduce dependence on imports.

The FID could even make the country more dependent on imports especially for basic materials and capital goods as most of the investments need imported basic materials.

Instead of strengthening the country`s manufacturing sector the FID would increase the burden of the country`s trade balance although the economy would post a high growth, she said.

"This is already reflected in the country`s trade balance," she said pointing to growing trade deficit.

The problem would be worse and would put pressure on the domestic economic potentials in the future, she said.

She noted in the first half of the year domestic investment grew only 10 percent, which is not real as the 10 percent growth served to offset a no growth in infrastructure.

Earlier the government predicted new investment will exceed Rp300 trillion in the whole of this year.

Formation of Gross Fixed Capital in 2013 is forecast to grow 11.9 percent to Rp390 trillion.

Based on the draft state budget for 2013, the government investment funds is set at Rp14.5 trillion including Rp6 trillion for Government Investment Center , Rp6.4 trillion for State Capital Participation and Rp2.1 trillion for rolling fund.
(Uu.AS/H-ASG/H-YH)

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