American, Indonesian businesses enjoy long-standing relations

Rendi A. Witular, The Jakarta Post, Jakarta

It was Standard Oil that pioneered the arrival of U.S. companies in Indonesia during the Dutch East Indies days in the late 19th century.

After years of trying to gain entry here, the company finally managed to start oil prospecting and production in Pelembang, South Sumatra, in 1897. The production facility it established was its first in Southeast Asia.

Following in the footsteps of Standard Oil, the United States Rubber Company -- which later became the Uniroyal Tire Co. -- came to the Indies and established a vast rubber plantation at Kisaran in North Sumatra. The plantation eventually became one of the largest in the world.

In the 1930s, tire company Goodyear Tire & Rubber Company came here to establish rubber plantations, and Caltex arrived to prospect for oil.

With the establishment of these companies, the Dutch East Indies became the third most important destination for United States direct investment in Asia before the Second World War erupted.

After Indonesian independence in 1945, U.S. companies began to play a dominant role in the country's economy, expanding into a wider range of activities, including the manufacturing, financial and service sectors.

In today's Indonesia, it is common even in the villages to see instantly recognizable icons of U.S. business, such as Coca Cola, Pepsi, McDonald's, Kentucky Fried Chicken, Starbucks, and many more.

While the United States has become Indonesia's main trading partner, its companies have been investing less and less since the 1998 Asian financial crisis and the 2001 terrorist attacks on New York and the Pentagon.

Based on a report from the Investment Coordinating Board (BKPM), the United States came ninth on the list of the biggest investors in Indonesia in 2004 and in the first five months of this year.

The American Chamber of Commerce in Indonesia (AmCham), a lobby group which represents over 300 U.S. companies in Indonesia, has said that the high level of economic risk and uncertainty have reduced the appetite of foreign investors to come here.

The risks and uncertainty include problems such as corruption, policy inconsistency, weak law enforcement, and poor coordination among government departments, as well as between central, provincial and local governments.

"From an investor's point of view, major concerns in Indonesia are transparency and the quality of regulations, the control of corruption, the rule of law and regulatory certainty, as well as overall government effectiveness," AmCham president Joe C. Bartlett said in a presentation last year.