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Tim Metcalfe

HONG KONG entrepreneurs make up the second largest group of investors in Indonesia and their rush to capitalise in one of Asia fastest-growing economies shows no sign of easing.

The Japanese are the largest investor group.

Last year, investors went into overdrive with 36 projects valued at just over US$6 billion.

 It was a flood of cash compared with the 24 projects valued at US$384 million in 1993.

 In the first four months of the year, Indonesia attracted another US$664 million in investment.

  Hong Kong's investments account for 14.1 per cent of all foreign projects with 378 enterprises valued at US$15 billion.

  Japan's investments are worth US$19 billion.

 Britain has invested US$11 billion and the United States US$10.6 billion.

 Indonesia's Consul-General in Hong Kong, E. A. Tamara, expects more investments from the territory.

  In recent weeks, he has accompanied two delegations of local entrepreneurs on fact-finding tours to view potential investment avenues.

 One group visited the island of Batam, a 40-minute ferry ride from Singapore. The other toured fast-changing Jakarta.

 Mr Tamara said the capital's transformation could be attributed to President Suharto's 'New Order' policies introduced after his 1966 election. Until then, Indonesia was languishing.

  The first two decades of independence were dogged by an armed struggle to free the nation from the shackles of Dutch colonial rule and a domestic communist uprising.

  Foreign trade dwindled and the economy was on the brink of collapse with declining productivity, commodity prices that were spiralling out of control and hyperinflation.

 'Since 1965 the economy has been stable with an average growth of six to seven per cent,' Mr Tamara said.

   'According to the 1994 census, there were 27 million poor people but the figure has been reduced to 15 million this year.'  Indonesia has successfully reduced its dependence on oil revenue.

 The 1983 oil crisis prompted a switch in policies.

 At the time, non-oil exports accounted for only 20 per cent of foreign exchange earnings. By 1994, non-oil exports accounted for 76 per cent.

 Deregulation and dismantling bureaucracy to lure foreign investment was the key, along with developing domestic industry and enterprise. The process is on-going.

  Indeed, the deregulation programme will continue until 2003.

   Mr Tamara said: 'The government has now become a promoter and facilitator of economic development through trade and investment.'  Since 1992, foreign investors have been permitted to hold 100 per cent equity in enterprises.

 Foreign entrepreneurs can invest in the former public sector monopolies such as airlines, shipping, ports, telecommunications, water, railways, atomic energy reactors and even the media.

 Mr Tamara said an environment now existed 'which is conducive to expanding business and investment'.

 And Hong Kong has been quick to grasp the opportunities.

 The territory's investments range from textile and toy factories to hotels, financial services, mining, oil exploration, fishing and heavy industry.

 Indonesia has showed its commitment to maintaining a favourable economic climate for foreign investors through deregulation.

   'It can be anticipated that the scope of co-operation between Indonesia and Hong Kong will be broadened,' the economic affairs spokesman said.

 'Hong Kong can make better use of Indonesia's abundant land, labour supply and raw materials to diversify its industry and enlarge its production base.

 'On the other hand, Indonesia can continue to acquire from Hong Kong modern management skills and take advantage of the territory's position as a centre of international trade and finance, as well as its strategic location as the gateway to China and the Pacific rim.'  Indonesia's commitment to encouraging foreign investment was underlined only three months ago by the government's latest deregulation package - part of the process which has been continuing since 1983.

 The process has one aim: to maintain the momentum of national economic development by opening up to foreign investors.

 The economic affairs spokesman said: 'For Hong Kong investors, Indonesia can be considered an option whenever they are planning to diversify their business activities.' 



Investment soars to $46.2b