RI attractive, but has many problems: Australian experts<\/p>\n
Johannes Simbolon
\nThe Jakarta Post
\nSydney<\/p>\n
Despite the numerous problems now confronting the
\ncountry, Indonesia remains attractive to many foreign investors.
\nBut, Indonesia has to work hard to revive investors'
\nconfidence before they are willing to come back into
\nthe country with the same amount of enthusiasm they demonstrated
\nfor several decades prior to the economic crisis, Australian
\neconomist and investor said.<\/p>\n
John Edwards, chief economist of the HSBC Bank Australia
\nLimited said here on Monday that honoring contracts
\nwith foreign investors was a key step for the Indonesian
\ngovernment to revive investors' confidence.<\/p>\n
"In order to restore Indonesia's status in the global economy,
\nit needs to convince the world that contracts are enforceable and
\nthe government is acting in the way of welcoming investors,"
\nEdwards said here in a workshop with Indonesian journalists.<\/p>\n
Edwards did not specify the contracts in question, but many
\ninvestors, particularly in the energy, power and mining sectors,
\nhave often criticized the Indonesian government for failing to
\nhonor their contracts.<\/p>\n
In the wake of the 1997 financial crisis, the Indonesian
\ngovernment suspended most of the 27 contracts between independent
\npower producers (IPP) and state electricity company PT PLN as
\npart of the retrenchment measure to deal with the economic
\ncrisis. Some of the IPPs took the case to international
\narbitrators who later ordered the Indonesian government to pay
\ncompensation to the investors.<\/p>\n
Last year, the government revived all the contracts to avoid
\nmore arbitration proceedings and to ensure power supplies in the
\nfuture.<\/p>\n
In the mining sector, dozens of foreign investors
\nhave been complaining for years over the Forestry Law of 1999,
\nwhich bans them from developing open pit-cut mines in protected
\nforests, and the Ministry of Forestry's decision to designate the
\ncontract areas as protected forests. The investors regret the
\nfact that the policy came years after they had conducted
\nexplorations. They accuse the government of failing to respect
\ntheir contracts of work.<\/p>\n
Due to Indonesia's failure to enforce the contracts,
\nEdwards said, investors still prefer to stay away from
\nIndonesia. This is despite the government's recent achievement in
\nstabilizing the rupiah and restructuring the financial sector.<\/p>\n
"Indonesia has been punished by investors the same
\nway they rewarded it with a superior economic growth for
\n20 years prior to the economic crisis," Edward, who is the former
\nprincipal economic advisor to former Prime Minister Paul Keating,
\nsaid.<\/p>\n
Also speaking in the same forum, Bruce Munro,
\npresident of PT Thiess Contractors Indonesia, the
\nsubsidiary of Australian construction giant Thiess Pty Ltd., said
\nthe Indonesian government's unwillingness or inability to
\nmaintain law and order as well as rampant corruption were among
\nthe main pushing factors for investors.<\/p>\n
"We believe corruption will still exist in Indonesia
\nin 2010," Munro said.<\/p>\n
The increasingly active labor unions have also added to the
\ntroubles, while the existing labor law fails to address labor
\nunions' demands and the government is unwilling to take
\nactions against unlawful union actions, he said.<\/p>\n
"In fact, Minister of Manpower and Transmigration
\n(Jacob Nuwa Wea) supports unions," Munro said.<\/p>\n
The implementation of regional autonomy, which
\ninvestors believe would create a better investment climate in
\nIndonesia in the long term, still causes a headache for investors
\nas regional governments abuse it to enrich themselves,according
\nto Munro.<\/p>\n
The fear of terrorism threat and the nightmarish
\nmemory of Bali bombing keep haunting investors in Indonesia and
\nmake them feel insecure.<\/p>\n
Thiess is one of the largest construction firms now operating
\nin Indonesia's mining, energy and telecommunication sector with
\nthe existing contract value totaling US$2.7 billion.<\/p>\n
Both Edwards and Munro however maintained that
\ndespite all the problems, investors believe that Indonesia still
\nhas a lot of advantages to lure back international investors,
\ncompared to many developing countries.<\/p>\n
"It (Indonesia) is not like for example Nigeria which also
\nhas natural resources but nothing else. No agriculture, no
\nmanufacturing, no disciplined workers, no education," Edwards
\nsaid.<\/p>\n
Edwards said investors appreciated the fact that Indonesians
\nconsider education as a high value. Investors also found it
\nattractive that Indonesia has a diverse industrial base, has
\nmanaged to carry out a transition from agriculture to industry
\nand has recorded 20 years of superior economic growth until the
\n1997 economic crisis, according to Edwards.<\/p>",
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