Indonesia's failure to attract foreign investment is dragging on growth prospects and adding to unemployment, the World Bank said in a report.  Without a turnaround in investment the country's economy is likely to expand around 4% annually and is not enough to improve the employment condition, said the World Bank on its East Asia Update published today.

Indonesia's economy relied mainly on consumer spending last year, which grew strongly amid falling interest rates, added the bank.

However, investment remained low, largely because of foreign investor concerns over threats of terrorist attacks, corruption and a weak legal system. "Low investment growth is likely to continue for some time," the World Bank said.

Oil and gas investment has also dropped off due to uncertainties about the extension of production-sharing contracts between the government and foreign oil companies.

Public debt fell to 69% of gross domestic product last year from 158% in 1998 due to the government's efforts to slash spending and boost revenues.

Meanwhile, the Government projected growth for 2005 at 5 to 5,5%, and inflation rate at 5%. Interest rate is expected at 7%, exchange rate at Rp.8.400 to Rp.8.750, oil price at US$ 21-24 per barrel and oil production at 1,1 million barrel per day said finance minister Budiono in Bappenas building today.

According to Bappenas, open unemployment in 2005 is estimated to reach 11,2 million people or 10,4% of GDP. Amount of workforce for 2005 will be 95,9 million people distributed into 42,4 million people in agricultural sector, processing industry 12,5 million people and others 41 million people.

(mma)