`Investors are like mistresses'<\/p>\n
Yose Rizal Damuri, Centre for Strategic and International Studies
\n(CSIS), Jakarta, yose_rizal@csis.or.id<\/p>\n
The list of multinational companies planning to stop their
\nproduction activities in Indonesia gets longer by the day. After
\nSony Corporation's decision last month to pull out its
\ninvestment, this month we will see many more companies follow
\nthem. U.S.-based cosmetics giant Avon Products Inc, for example,
\nis mulling the closure of its factory in Indonesia.<\/p>\n
Those two companies were not the first to decide to walk away
\nfrom this country. Before them, several Korean and Japanese
\nbusiness associations here also felt that doing business in
\nIndonesia was no longer attractive. Even when they mostly agreed
\nthat Indonesia was still a fascinating market for selling their
\nproducts, the numerous difficulties they face are no longer
\nacceptable. In fact, it only exacerbates the already gloomy
\ninvestment climate in Indonesia since the financial crisis began.<\/p>\n
The relocation of Sony and other companies' factories to other
\ncountries is a direct consequence of the government's lack of
\naction in creating a healthy investment climate.<\/p>\n
Cumulative approval of investment has declined drastically.
\nNot only the value of foreign investment approval this year that
\nhas deteriorated by around 49 percent compare to last year, the
\nvalue of domestic investment even declined faster, around 70
\npercent. This time around, not only foreign investors feel
\nuncomfortable about the business environment in Indonesia,
\ndomestic businesses also lost their taste. The picture of the
\ninvestment situation presents a depressing prospect of the
\nIndonesian economic recovery.<\/p>\n
Right after Sony's decision was announced, several high
\ngovernment officers did respond to the news, but not in the
\nexpected way. Some said that it was just a blown up media affair;
\nand the \"real situation\" is not so bad. Another top government
\nofficer even revealed his disappointment by dismissing it as
\n\"irresponsible investor behavior\". He said most foreign investors
\njust had the intention to exploit the Indonesian economy for
\ntheir benefit only, leaving the country while problems are facing
\nthem.<\/p>\n
While what he said might be true, it is not sensible to blame
\ninvestors who leave this country for greener pastures. As has
\nbeen said, money has no nationality; we cannot expect foreign
\nbusinesses to keep doing business here while they lose profit due
\nto all the problems here.<\/p>\n
One of my friends put it in another perspective. Investors are
\njust like a mistress; you should treat a mistress in an excellent
\nway otherwise she will ditch you. Unlike a wife who is expected
\nto be with you for better or worse, a mistress will definitely
\nrun off if she doesn't get what is expected; let alone treating
\nher inadequately. It is your everyday \"job\" to persuade her to
\nkeep \"sleeping in bed\" with you. It is the job of the government
\nto sort out problems arising in the business environment.<\/p>\n
Complaints of an unfavorable environment from the private
\nsector have been long heard, however they usually only turn out
\ngetting place at the bottom of a very long list of unsolved
\nproblems. The list includes security and political instability.
\nThe risk of being burgled and ransacked still exists, even though
\na relatively conducive political environment of late has
\nadmittedly reduced that threat. Another issue is labor problems.
\nApart from the minimum wage that keeps increasing every year,
\nbusiness societies also face the fact that there is no clarity on
\nthe labor and industrial relations issues, as Indonesia still has
\nno permanent laws on the matter.<\/p>\n
This list is longer if we take into account some government
\npolicies concerning the business sector, such as tax and customs
\npolicies. With the difficulties of meeting its budget, the
\ngovernment has taken all possible measures to increase revenue.
\nUnfortunately, the government has adopted a strategy of \"hunting
\nin the zoo\", wherein they increase taxes to those that already
\npay, including higher taxes on sales and production, rather than
\ngoing for huge percentage that do not pay or underpay.
\nInevitably, the excessive sales and value added tax increase cost
\nof production and reduce business competitiveness.<\/p>\n
Sometime, or perhaps most of the time, we forget that we are
\nstill struggling to get out of the economic crisis. For a couple
\nof years, the economy has recorded positive growth in some
\nmacroeconomic indicators. That is a remarkable improvement in the
\neconomy, but that does not mean we already have left the crisis
\nbehind.<\/p>\n
Since 1999 the economic growth has been driven mainly by
\nconsumption. Around 60 percent of economic growth comes from
\nprivate consumption. While, consumption is still a big part of
\nnext year's economic growth, this factor cannot be expected to be
\na sustainable source of growth. The latest data shows that the
\ngrowth of consumption dropped quite remarkably compared to last
\nyear. Sooner or later, people will not have enough money to keep
\nup the pace of their consumption, and that would, for sure, harm
\nthe sustainability of economic growth.<\/p>\n
There is no other option to maintain or perhaps boost economic
\ngrowth except to increase investment. Investment-driven growth is
\nnot only more sustainable but also has a spillover effect on the
\neconomy. The more investments the more unemployed people are
\nlikely to get better jobs. With a massive unemployment rate,
\nstrategy that will enhance investment is unquestionably required,
\nnot the opposite.<\/p>\n
Good strategies are certainly do not include those that create
\napprehension to foreign investors. The problems surrounding the
\ninvestment climate are actually quite common and recognizable.
\nMany studies and dialogs have revealed all these factors and
\nproblems.<\/p>\n
The first thing that we need to do is to change our negative
\nattitude and perception towards investors and business societies.
\nIndonesia's economy needs those people and is our responsibility
\nto provide them with a more conducive investment climate, one
\nthat creates profit for them.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/investors-are-like-mistresses-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}