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JAKARTA - As Indonesia heads for elections, some politicians are taking a more nationalist line on the country's vast natural resources, a move that could scare off much-needed foreign capital amid the global credit crunch. While some industry experts see the rumblings over foreign investment as campaign trail posturing, the rhetoric highlights the risks for investors in Southeast Asia's biggest economy, particularly in its energy and mining sectors.
Indonesia has some of the world's largest deposits of natural gas, nickel, copper, tin and coal, and several global resource firms, including Chevron Corp and Newmont Mining Corp., operate in the country. U.S.-based risk analyst Daniel Wagner said it was natural to see a more nationalistic stance on resources during elections, but that Indonesia could lose out given the scarcity of capital.
"Since foreign investors are generally hesitant to invest in emerging markets at this time, sending the wrong signals to the global investment community now could result in decreased foreign investment when the world emerges from this economic convulsion," said Wagner, managing director of Country Risk Solutions.
The fact is that even during the commodity boom of the past few years, Indonesia missed out because of uncertainty over its mining laws and a difficult investment climate. The fall in world demand has hit commodity prices, leading to a slump in Indonesia's commodity exports and job lay-offs.
All this has contributed to making resource exploitation a hot campaign topic ahead of parliamentary elections on April 9 and presidential polls on July 8. The outcome will determine whether reform-minded technocrats exert greater influence over a host of economic, investment and resources-related policies.
If President Susilo Bambang Yudhoyono is re-elected with a strong mandate, he is expected to push ahead with reforms which could encourage more foreign investment.
But if he forms a coalition with nationalist parties opposing foreign investment, it may prove tough to attract overseas capital - even though Indonesian firms including state energy company Pertamina and local mining tycoons admit to needing foreign funds and technology for refineries, exploration and smelters.
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