As long as Indonesia is unable to fix its corrupt bureaucratic and legal system, the country will find it difficult to attract foreign investment from the U.S. or other countries, the U.S. envoy here says.
Ambassador B. Lynn Pascoe said in Jakarta on Wednesday that the meeting between U.S. President George W. Bush and President Susilo Bambang Yudhoyono earlier this week, where they discussed bilateral relations and investment, among other things, would not help increase foreign investment in Indonesia if the Indonesian government itself failed to remove the barriers.
"Yes, they both discussed how to boost foreign investment into this country. But investment goes to countries that make it good for investment to come. You can't invest in a place for political reasons," he told a press conference Wednesday.
He said that it was very striking that American companies signed investment deals worth up to US$2.5 billion in Vietnam when the U.S. president visited that country recently.
"It goes to Vietnam and other places because they set conditions for the companies to come and do better," he said.
He noted that a lack of legal uncertainty remained a major problem for Indonesia in attracting foreign investment, pointing to the prosecution of Newmont Minahasa Raya president director Richard Ness, an American, who is facing three years imprisonment if convicted in a North Sulawesi court of causing pollution, as setting a bad example.
"What we want is Indonesia to become a competitive place ... one thing you don't do ... is bring court cases against somebody where you don't have any evidence. This is exactly what has happened in the Ness case. I read what they (the prosecutors) said, and we have had a whole year of testimony that says it's wrong," he said.
It was only by changing the legislation and ancillary regulations, and making sure that the people in charge are doing the right things, Pascoe said, that Indonesia could hope for more foreign investment.
Pascoe also complained about the problems faced by potential investors when "they run into the Indonesian bureaucracy", and about xenophobia and "anti-foreign" sentiment here, saying that every "comment aimed at telling foreigners how bad they are" only served to take investment away from Indonesia.
University of Indonesia economist Muhammad Chatib Basri agreed with Pascoe, saying that Indonesia's investment climate was still far from encouraging for investors due to a lack of legal and statutory clarity.
"Newmont is only one of many cases that concern many people. Labor law, for instance, is another problem. We have the commitment but we need time," he told The Jakarta Post.
Chatib said that the U.S. was very important to Indonesia as it could influence other countries to invest in here.