Agreement 'will improve economic ties between RI, Japan'

Indonesia and Japan have launched a high-level forum involving the government and private sector to discuss and solve problems hindering investment here, with one of the options being the Economic Partnership Agreement (EPA), which was initiated by Japan.

Under the EPA, Indonesia may provide a number of incentives for Japanese businessmen seeking to invest in the country; in return, Indonesia expects Japan to lift trade barriers which have hampered trade between the two countries.

To learn more about the benefits of the partnership for the business communities of the two countries, The Jakarta Post's Rendi A. Witular talked with Tadashi Okamura, president and chief executive officer of Japanese electronic and infrastructure giant Toshiba Corporation, and chairman of the Japan-Indonesia economic committee at the Nippon Keidanren.

The following is an excerpt from the interview.

How will the EPA benefit Japanese companies when they invest in Indonesia?

Both the Indonesian and Japanese governments are now beginning talks over the (planned economic) partnership. They have held a preliminary meeting, but the outcome is not yet significant. The two countries will have a great deal of work to do and will spend a lot of time to agree on the partnership.

Concerning the partnership, Indonesia is lagging behind Thailand, Malaysia and the Philippines, which are already closing talks to ink the partnership. We are hoping that Indonesia will work on it quickly.

The partnership is wider in content compared to the free trade area deal as it also includes efforts to boost investment and improve business conditions for both the Japanese and Indonesian companies.

Under the EPA, we expect our investment in Indonesia will be more ensured, in terms of business climate, regulations and incentives. With such conditions, we anticipate more Japanese corporations will invest again in Indonesia.

The Japanese business community has suggested to both the Indonesian and Japanese governments that under the EPA, crucial investment problems in Indonesia, such as infrastructure, the tax scheme and labor system, should be thoroughly discussed and settled.

We also expect that under the EPA, the Indonesian government can provide tax incentives, more or less similar to those offered by China when trying to lure foreign investors. Without such sweeteners, Indonesia will be less competitive compared to China and other countries in the region.

Aside from that, Indonesia should also improve transparency in order to eliminate corruption. As far as I am concerned I don't know exactly how it has impacted our business here, but for sure the consumers are bearing the brunt of it because of the high prices as a result of higher production costs.

Is there any plan for Toshiba to invest again in Indonesia if the EPA is finally agreed on?

Toshiba manufactures television sets here, producing some 1.8 million televisions per year with 80 percent of the products exported and 20 percent for domestic demand.

We also have a manufacturing facility for television tubes, under a joint-venture scheme with Japan's Matsushita Corp.

In the infrastructure sector, Toshiba is currently working on the Tanjung Jati power plant project and hydrogen power plant in South Sulawesi.

If the EPA is agreed on, we will propose to the Indonesian government the possibility of a joint venture to establish a nuclear-power plant (in Jepara, Central Java), which I believe was halted six years ago due to the financial crisis and objections from local residents.

As for electronic manufacturing, we don't have any plan to add to our investment here in the short term. However, we believe that the Indonesian economy will grow rapidly in the next couple of years, in which there is a possibility for us to reevaluate the decision.

If you reevaluate your decision, in which sector are you planning to invest in?

For electronic manufacturing, there is a possibility that we may make Indonesia our production base for washing machines and refrigerators in the long term.

There is also a plan to produce some of our computer devices and components, such as semiconductors, here to supply our personal computer production base in the Philippines and China.

However, the problem for Indonesia in developing the electronic industry, as we have discussed with your government, is that the small-and-medium enterprises (SMEs) here are not yet empowered in terms of management skills and technology.

Until now, we are still collecting parts for manufacturing our television from outside Indonesia.

I think it will take years for the SMEs to produce such products. If the EPA is agreed on by both countries, Toshiba is willing to transfer the necessary technical skills to the SMEs.

.LM