Abstract
This paper tries to assess the effects of implementing foreign investment in Indonesia on the country's imports from home countries. This effect is found to be sizeable as more than 50% of realised foreign investment in Indonesia is implemented m kind. 1.e. by importing plant equipment. Furthemore, sectoral kind-cash financing ratios have been correlated with sectoral loan-equity ratios of realised investment from Japan as the largest country investing in non-oil sectors. This correlation is found to be negative and is explained by the way that investment legislation provides incennves for foreign investors to pay them equity contribution in kind and convey ownership of the plant equipment to local nationals later on. 1 This paper is part of a research project on the competition among German, Japanese and US suppliers in ASEAN markets. The project is carried out with financial support from the Volkswagen Foundation The author has benefited from helpful comments provided by Ulrich Hiemenz. and Hal Hill, Th...
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