Jakarta, Indonesia (News Today) - Uncertainty about stability may prompt foreign investors to take their eyes off Indonesia, something that might trigger a capital outflow, according to an economic observer."The tax mafia case involving Gayus Tambunan has become a political issue that will certainly have a negative impact on the investment climate in Indonesia," said Latif Adam, a researcher with the Indonesian Science Institute’s Center for Economic Studies, here on Thursday.
Adam added the metamorphosis of the case into a national political issue would surely diminish foreign investors’ interest in Indonesia. Adam was asked for his comments after Bank Indonesia, the central bank, acknowledged there had been a capital outflow in recent weeks due to worries over inflationary tendency ahead.
BI public relations bureau chief Difi A. Johansyah said here Wednesday in the second week of January there had been selling pressure by foreign investors as they lost interests in all domestic financial assets which kept sliding vis-a-vis the native sentiments in the regional market and worries over inflationary tendencies including in Indonesia.
Based on those conditions in the market, the rupiah-denominated government bonds held by foreign investors decreased to 29.4 percent from 30.4 percent and the SBI bonds had slid to 26.4 percent from 31.1 percent. The investors have their own criteria on political stability in a country where should they feel the political stability is not adequately conducive, then they might withdraw all their investments.
The unstable political conditions will be one triggering factors for them to withdraw from Indonesia, though the plight would not be as huge as it had been during the crisis in 1998.
However, he added, that investment climate in Indonesia still is likeable among investors due to the fact that economic and investment climate woes in Europe had not yet recovered. "Indonesia is still of their interests because the situation in Europe has not really been stable," he said.
He therefore reminded the government to pay a real close attention on solving the problems hindering the political stability in Indonesia.
"As what we’ve known, the government plans to issue state debentures (SUN) up to 200 trillion rupiahs in 2011 alone. I hope that this issue be finalized first," he pointed out, adding that if the tax mafia case remains unresolved then the government would lose.
Source : kompas
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