-- Foreign direct investment in Indonesia rises to record in
second quarter and first half
-- Record total investment driven by mining and
manufacturing
-- Government forecasts full-year total investment to hit record
IDR283.5 trillion
-- Official says talk of worsening investment climate
"unfounded"
(Adds details on investment destination and industry in 9th-11th
paragraphs, news of Exalt deal in 12th-13th paragraphs, news of
Intrepid shares plunge in 16th-18th paragraphs.)
By Linda Silaen and Ben Otto
JAKARTA--Foreign direct investment in Indonesia rose 30.2% in
the second quarter from a year earlier to a record 56.1 trillion
rupiah ($5.9 billion), suggesting investors are shrugging off
concerns about tighter regulation in Southeast Asia's biggest
economy.
The inflow of capital for investments in projects in mining,
pharmaceuticals and other industries, reported Wednesday by the
Investment Coordinating Board, will likely help ensure that
Indonesia remains among the few countries posting relatively strong
growth this year despite the euro-zone debt crisis and slowdowns in
other major economies.
Indonesia's strong economic growth in the past five years, its
natural resources and an increasingly affluent population have been
a magnet for investors in recent years, and the latest data suggest
FDI this year could exceed the record $19.3 billion set in
2011.
In addition to the foreign investment, local companies spent a
record IDR20.8 trillion during the April-June period, up 10.1% from
a year earlier, the board said.
The increases come despite a lack of progress in the
government's efforts to improve its poor infrastructure and recent
worries about regulations in industries such as mining that some
analysts deem to be protectionist.
"It shows that the worries were unfounded," said Chatib Basri,
head of the investment board. "I'm optimistic that investment from
both foreign and domestic investors will continue to rise in the
third quarter."
The board forecast total investment for 2012 at a record
IDR283.5 trillion, after IDR148.1 trillion in the first half.
The quarterly increases were driven by mining and manufacturing,
led by investment in North Maluku in a new $500 million
ferro-nickel plant that is 90% controlled by Eramet SA, a French
mining and metals group.
About $1 billion in FDI went to both mining and the chemical and
pharmaceutical industries, $600 million for electricity, gas and
water supply, $500 million for food, and $500 million for metal,
machinery and electronics. Some $800 million came from investors in
Singapore, $700 million from the U.S., $600 million each from Japan
and Australia and $500 million from South Korea.
Most of the FDI went to projects in the provinces of East Java,
West Java, Banten, Papua and East Kalimantan. About IDR34.7
trillion--some 45% of total FDI and local investment--went to areas
outside Java, a 4.8% increase from the same period in 2011.
The board said first-half FDI rose 30.2% from a year earlier to
IDR107.6 trillion. FDI in the first quarter of 2012 was $5.6
billion, previously the record high for a quarter.
The data came a day after Exalt Resources Ltd., an Australian
resource and energy exploration company, announced it had signed an
agreement to acquire Odni Holdings, a Singapore coal-investment
company with rights to acquire stakes in six coal mining projects
in Indonesia.
"We have focused on Indonesia because we believe it offers the
best value opportunity for coal sector investors at this point in
time," Barry Tudor, chief executive of Exalt, said in a press
release.
On July 5, the United Nations Conference on Trade and
Development said in an annual survey of 174 companies that
Indonesia ranked fourth among FDI destinations in the next two
years, rising two notches from 2011 and following only China, the
U.S. and India.
Still, some worry that an uncertain regulatory environment means
Indonesia is losing out on even more investment.
In the latest example of a foreign company uncertain about where
it stands in Indonesia, Australia-listed miner Intrepid Mines Ltd.
said last week its employees were forced off of a gold and copper
exploration project in Indonesia by the company's Indonesian
joint-venture partners.
While Intrepid thought it effectively controlled the project,
which had discovered potentially billions of dollars worth of gold
and copper reserves on the island of Java, its Indonesian partners
have apparently sold their stake to a new group of investors who
have forced Intrepid's representatives to leave the exploration
site.
Intrepid's Sydney-listed shares, which were among the
best-performing stocks in Australia recently, have plunged more
than 50% this week on the news.
--Eric Bellman contributed to this article.
Write to Linda Silaen at linda.silaen@dowjones.com and Ben Otto
at ben.otto@dowjones.com
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