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June 26, 2008

Indonesia expects record investment in 2008-09
Indonesia's chief investment agency said it expects foreign and domestic investment
to hit a new record this year and in 2009, driven by demand for new infrastructure
including power plants and toll roads, reported Reuters.

Muhammad Lutfi, who heads the agency, said he is optimistic that total domestic and
foreign direct investment would rise 15 percent to nearly $16 billion in 2008, from
a record $13.8 billion in 2007, and surge to $20 billion next year.

Southeast Asia's biggest economy badly needs billions of dollars of investment,
especially in infrastructure, to push economic growth and reduce high unemployment.

"We are certain that we will meet the 15.2 percent target of investment (growth)"
for 2008, Lutfi told a gathering of foreign correspondents in Jakarta on Wednesday.

"We had a good number in the first quarter. Next year is a challenge because of the
slowdown of the economy, that's what we feel."

A combination of political stability and an improving economic outlook helped to
attract a record foreign direct investment last year, although the agency, known as
BKPM, does not provide details of the investments.

Some analysts warn that political uncertainty ahead of next year's parliamentary and
presidential elections, and a slowdown in economic growth could hurt investment.

The government's decision to hike subsidised fuel prices by an average of nearly 30
percent in May is expected to lead to weaker consumer spending. The government
expects GDP growth of 6-6.4 percent this year, compared with 6.3 percent in 2007.

However, Indonesia still lags countries such as China in attracting foreign
investment because of perceived legal uncertainties and graft, and a complicated

The country ranks 123rd out of 178 countries in terms of ease of doing business,
according to a World Bank survey last year.

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