Think ahead: Indonesia can gain without pain<\/p>\n
John A. Prasetio and David Parsons, Jakarta<\/p>\n
Amid his crisis talks last week, President Susilo Bambang
\nYudhoyono addressed over 700 representatives of Indonesia's
\nforeign investment community. This large, influential group had
\nbeen called together by their foreign chambers, and they were
\nlistening very carefully.<\/p>\n
However, this important event with not less than 50 reporters
\npassed with only limited coverage because the media and the
\nnation were focused on the current national emergency -- the
\nplunging rupiah.<\/p>\n
Perhaps the media thought that the meeting entitled "Making it
\nHappen: Building a Better Investment Climate for the Development
\nof Indonesia" was unimportant because it was not held as part of
\nthe crisis talks. There was no appeal for calm, no air of
\nemergency or buzz about Bank Indonesia's capacity to save the
\nday.<\/p>\n
They were right, in some respects. There was a sense of
\nurgency but not emergency. Economic stability was at the heart of
\ndiscussions but not the role of Bank Indonesia. The President and
\nthe participants understood very clearly the importance of the
\ngathering and decided it should happen on a regular basis.<\/p>\n
What were they doing? The foreign investors were attentive to
\nthe resolve of the President to take action now on many seemingly
\nsmall issues that together would boost Indonesia's investment
\nclimate and give Indonesia a more stable future. Their collective
\ninterest is in defining and solving problems before they become
\nemergencies. Everybody, including the President, knows that if
\nthese issues are not addressed, Indonesia will have a bigger
\nproblem in the future than the one that surfaced last week.<\/p>\n
Amid the panic selling of rupiah assets over the last two
\nweeks, soul-searching questions from foreign investors came to
\nlight.<\/p>\n
Despite the able leadership of the President, why is the
\npace of reform so frustratingly slow? Yes, there was a timid
\ninvestment recovery in the first few months of the year, but, for
\ngreenfield investment, no big capital inflow has yet come. There
\nis now a clear realization that it will never come unless the
\nstructural weaknesses in the economy are addressed through
\ndecisive policy reforms. Without investment we will limp from one
\ncrisis to another, we cannot offer jobs or growth and we cannot
\nstabilize the value of the rupiah over the long term.<\/p>\n
In the context of the tough week Indonesia has just been
\nthrough, the contrast between crisis meetings on oil and the
\nrupiah and the meeting the President had with foreign investors
\nis worthy of note. It reveals our attitudes to the challenge of
\nsecuring our future and how we operate in government and
\nbusiness.<\/p>\n
Too often Indonesia moves in and out of the crisis zone. In
\nreality, the only emergencies that Indonesia should now be
\nmanaging are natural disasters. Indonesia, having gained
\npolitical stability and the election of a strong leader, should
\nbe thinking ahead and taking decisions for long-term economic
\nstability and sustainability.<\/p>\n
Indonesia should be building a strong climate for investment
\nto lay down the foundations for 21st century infrastructure, new
\nfactories and equipment and new services. Only this will give
\nthem their jobs and prosperity.<\/p>\n
Indonesians should no longer feel that gross or even petty
\ncorruption is the way to get the engines of the government
\nmoving, to achieve justice or to supplement their incomes.
\n Foreign business visitors should not be hassled at the airport,
\nthe legitimate overpayment of taxes should be refunded without
\ndelay, and the legal framework for private sector participation
\nin infrastructure projects should be made more transparent and
\nsimple.<\/p>\n
The days of burdening our children with debt to sustain our
\npresent lifestyle and burning fuel excessively should be over.<\/p>\n
While many of us are still hurting from the 1990s crisis, we
\nshould no longer be nursing our wounds and blaming others. All
\nthe specialists advise that we start a good health regime.
\nIndonesia can work with foreigners and compete with them if it
\nsets the rules of the game and abides by them.<\/p>\n
What are the interests of foreign investors in Indonesia?
\nThey are no different from domestic investors. They see the
\npotentials of Indonesian people and Indonesia's vast resources.
\nThey seek a stable economic and political environment. They
\nsurvive and grow by making profits. They overwhelmingly want to
\nmake long term commitments in the country -- not take and run.<\/p>\n
Like most developing countries, Indonesia does not have enough
\ndomestic savings or the expertise to develop alone. Foreign
\ninvestors are, therefore, a means to lighten our debt load by
\nbringing in significant sums of money, the latest technology and
\nnew ideas for doing business.<\/p>\n
They create jobs, opportunities in supporting industries, a
\nhealthy flow of new tax revenues and much-needed export revenue.
\nThey can reduce our foreign exchange needs by producing goods and
\nservices domestically that Indonesia would otherwise have to
\nimport. They can even help us explore for more oil and build
\nrefineries.<\/p>\n
But Indonesia must realize that we are in a very competitive
\nworld. Foreign investors have many choices in many other
\ncountries including in our immediate neighborhood. Even our
\ndomestic investors look at these choices.<\/p>\n
Foreign investors are not asking for any more than any citizen
\nor any domestic investor should have. They are not asking for
\nanything more than they can get in successful neighboring
\neconomies.<\/p>\n
Of course, a stable macroeconomic climate including a stable
\nrupiah is crucial. But on the ground, when starting their
\noperations and in their day-to-day operations their interests are
\nvery basic. They seek timely government decisions and
\nimplementation without corruption and endless red tape, legal
\ncertainty with due process and without favor and a fair and
\ntransparent tax system. They want labor laws under which good
\nworkers can be hired and rewarded rather than laws that treat
\ngood and bad workers in the same way.<\/p>\n
Right now, our rules of the game do not measure up. They
\nneither serve our interests nor safeguard the foreign investors'.
\nThey are not implemented efficiently and transparently.<\/p>\n
The present problems with oil and the rupiah will require hard
\ndecisions and quite a lot of pain before they are solved because
\nwe kept putting off these "hard" decisions. This provides ample
\nevidence as to why the President should reenergize his economic
\nteam to be more focused on executing the reform agenda to regain
\nthe confidence of private investors and to open the way for the
\nreturn of the Indonesian money now parked overseas.<\/p>\n
We have a chance to move now on building the right investment
\nclimate to secure our development without the need for hard
\ndecisions, without pain and without an emergency. The President
\nknows this. He deserves the support of the whole country.<\/p>\n
John A. Prasetio is Vice President of Kadin Indonesia and
\nHead of its International Cooperation Department. David Parsons
\nis Senior Advisor to Kadin Indonesia.<\/p>",
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