The mainland has rolled out a package of incentives to attract foreign direct investment (FDI) to the less-affluent western provinces amid an overall decline in foreign inflows. Minister for Foreign Trade and Economic Co-operation Shi Guangsheng yesterday said that actual FDI declined 12.1 per cent year on year to US$3.86 billion in the first two months of this year. But Mr Shi said that the contracted foreign investment, an indicator of future investment intentions, gained 13.6 per cent over the period to $6.5 billion. Mr Shi said that exports rose by 41.2 per cent during the two-month period to $31.57 billion. Imports surged 54.2 per cent to $28.69 billion, giving the mainland a trade surplus of $2.88 billion in the first two months. Last month alone, exports surged 34.5 per cent year on year to $14.8 billion while imports climbed 54.1 per cent year on year to $13.4 billion. The fall in actual foreign direct investment follows an 11.4 per cent decline last year that was blamed on the effects of the Asian economic crisis and in particular concern that Beijing would devalue the yuan. Analysts have said that FDI should pick up when Beijing joins the World Trade Organisation, expected later this year. FDI amounted to $40.4 billion last year, compared with about $45 billion in both 1997 and 1998, according to official statistics. Mr Shi spelled out policies to attract foreign investors to support Beijing's massive go-west campaign. He said foreign enterprises investing in selective industries in the west would be given the same tax concessions as those in the special economic zones. The government was selecting a range of industries in the western provinces to be promoted to foreign investors, he said. 'We are identifying industries with good potential in the west and compiling a special catalogue to direct foreign investment to these industries,' Mr Shi said. Investors in these industries would be able to enjoy a two-year tax holiday and then tax rates of only 15 per cent - the same treatment as investments received in the coastal special economic zones. But he said this applied only to industries identified by the government. In addition, enterprises more than 25 per cent foreign-owned would be able to enjoy the privileges given to foreign firms. Other incentives to promote foreign investment in the less-affluent west included upgrading the special industrial zones in the capitals of western provinces to state level and allowing foreign-invested enterprises in coastal regions to purchase or buy into the companies in the west. Foreign firms eligible to launch pilot projects in the east would also automatically be given the right to launch pilot projects in western regions, he said. Premier Zhu Rongji has called for an all-out go-west crusade to develop the provinces so as to reduce the income disparities within the country.