The government is predicting that investment growth next year will decrease in line with the slowing down of the global economy, triggered by the trend of increasing world crude oil prices. “Perhaps in the first half of the year the influence won’t yet be there yet, but if (crude oil) prices continue increasing, then 2008 investment will be affected,” said Muhammad Lutfi, Head of the Investment Coordination Agency (BKPM) last weekend in Jakarta.
During trading on Friday, crude oil prices fluctuated until surpassing a new record of US$92.22 per barrel.
Predictions that prices will reach US$100 per barrel arose due to the high demand for oil nearing winter together with the heating-up political situation between both Turkey and Iraq and also the United States and Iran.
Lutfi explained that the factor of crude oil prices was quite an important influence as regards future investors in determining a country for investment.
This is because every (crude oil price) US$1 increase is a large influence, especially on price increases of fuel and other goods.
“Yet, Indonesia is still very competitive as it’s in the process of improving the primary commodity value chain,” he said.
Lutfi said he estimated that sluggish investment next year would also caused by the investment cycle that occurs once in two years.
Trade Minister Mari Elka Pangestu said she was of the opinion that sluggish economy will have a greater effect on developed countries whose growth would slow down.
“Asian countries whose growth is still high and structure is changing in this region, such as South Korea, Japan, Taiwan and China, still encourage the entry of investment,” she said.
Business circles are also predicting that next year’s investment growth will be more difficult compared to 2007.
This is because the government must still work hard to improve investment climate within a short period of time, especially to minimize high economic costs.
“The government must repair the investment climate, especially as regards infrastructure procurement and policy improvement,” Sofjan Wanandi, General Chairman of Indonesian Entrepreneurs Association, told Tempo last weekend.
According to BKPM records, during the first half of this year, foreign investment reached US$4.1 billion.
This is equivalent to Rp36.9 trillion and amounts to a 16.8 percent rise, compared to the total of US$3.51 billion in the same period last year.
This foreign investment contributed almost 57 percent to total domestic investment of Rp65.3 trillion.
Jakarta, 29 October, 2007 (TEMPO Interactive)
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