HIGHER INVESTMENT HAD NO SIGNIFICANT IMPACT ON THE REAL SECTOR

The Government claimed that attainments in Foreign Investment (PMA) amounting to Rp 51.5 tril­lion in quarter I-2012 was the greatest ever in history. However High foreign investment must be watched on as global economy was still unstable, especially in Europe and the USA. Some observers rated increased foreign investment in Indonesia would bring positive impact on employment, because the way it was hap­pening now was that foreign investmet did not con­tribute significantly to the real sector. However great the investment, unless they were invested in the real sector, the benefits would not be felt by the general public.

Senior economist Didik J. Rachbini stated in Jakarta on Monday (17/12/2012) that increased foreign investment had its positive and negative impact on Indonesia. The positive side was that foreign in­vestors had confidence to plant their capital in In­donesia. The negative side was that the investment increase, which would open job opportunities, could not be implemented in the real sector, which would open job opportunities.

Didik saw that increased investment would bring impact on employment. Still it had to be confirmed what was the actual figure supportive to the real sector. In principle, as long as there were investment increase there should be increased employ­ment, but better still if the employment were to be channeled to the real sector. Without the real sector, never expect any possible impact on the employment. “The way I see it, here in Indonesia investment in­crease had not its positive impact on the realk sector which accommodated workers” Didik remarked.

According to Didik, Indonesia’s promoted rat­ing to Investment Grade should be an opportunity to promote the real sector, Increased rating should pro­mote capital inflow to Indonesia. Such a condition would strengthen balance of payment, forex reserves and Rupiah exchange rate value. It was expected there would be inflow of foreign capital for long term investment for financing the real sector, especially for PMA projects, whereby to jack up higher economic growth.

Didik explained that the consequences of el­evated rating was high capital need and the need for better budget absorption not just relying on foreign investment but also on domestic investment. For that matter, Didik said, investment policy would be needed as well as sound policy for industry and trad­ing whereby to improve economic structure, inter-business relationship or inter-regional connections. If this were exercised it would not only induce higher growth but also create employment opportunities and eliminate poverty.

Meanwhile Chairman of the Indonesian Busi­nessmen Association Sofjan Wanandi rated that Indo­nesia's economy was growing on fragile foundation, because it was based on capital intensive business with low employment rate and supported by busi­nesspeople. According to Sofjan’s observation eco­nomic foundation of such nature contributed to vul­nerability of Indonesia's economy. The point was that high population caned for more labor in labor intensive projects. Ironically, labor intensive industry was being abandoned.

The Government, according to Sofjan, must revise development priorities. High on priority fist should be the labor-intensive sector like garment in­dustry, textile, and footwear. Contrary to expecta­tions, the Government concentrated on non-labor intensive projects like plantation, mining and service industry. Today, Sofjan said, development of process­ing industry or manufacturing were not potentially contributive to sustaining national economic growth. This was on account of the Government not support­ing labor-intensive industry. “Indonesia high economic growth was supported by non-tradable sector, while the tradable sector which was labor-iintensive was relatively low” Sofjan concluded. (SS)

Business News - December 21, 2012