Avon may follow Sony out of country

Avon may follow Sony out of country

Bambang Nurbianto, The Jakarta Post, Jakarta

U.S.-based cosmetics company Avon Products Inc. may follow
Japanese electronics giant Sony Corp. out of Indonesia because of
what it says are the difficulties in doing business here,
including security and labor problems.

The head of the Jakarta's City Investment and Business
Empowerment Agency, Hari Sandjojo, revealed that Avon was
planning to close its factory in Cilandak, South Jakarta, during
a hearing with the City Council's Commission B for economic
affairs on Tuesday.

He also said that as many as 20 foreign companies had canceled
planned investments in the city's bonded zone in Marunda, North
Jakarta.

Late last month, Sony Corp. announced that it would close its
audio plant in Bekasi, West Java, because of security issues and
chaotic labor regulations.

Sony employs some 1,000 workers, while PT Avon Indonesia, an
affiliate of the U.S,-based company, employs about 1,500 people.

If the two factories are closed it would only add to the huge
roll or unemployed, which Vice President Hamzah Haz said was
about 40 million nationwide.

Jakarta's City Manpower Agency chief Ali Jubeir said there
were about 550,000 unemployed people in Jakarta.

Hari said Avon was considering relocating its Indonesian
factory to another Asian country like the Philippines, Vietnam or
India, but he added that the Avon Indonesian board of directors
was working to keep the factory here.

"The desire to close the Indonesian factory comes from Avon's
central office in the U.S., and the board of directors here is
trying to keep the factory open. We support their efforts," he
said after the hearing.

Officials of PT Avon Indonesia could not be reached for
comment.

Hari said executives of PT Avon Indonesia would meet with
Jakarta administration officials to discuss the matter.

He said that apart from security concerns, labor issues such
as the recent increase in the minimum wage had prompted the U.S.
company to consider shutting down its Indonesian operations.

The monthly minimum wage in Jakarta will increase from Rp
591,000 (US$66.77) to Rp 631,000 (71.29) starting this January.

Another sign of Jakarta's gloomy investment atmosphere is the
number of investors who have canceled plans to open operations in
the bonded zone in Marunda, Hari said.

"They had operational permits to do business in the bonded
zone but they withdrew their commitments."

Basri Marzuki, a commission member from the Indonesian
Military/Police faction, said security and labor were not the
only issues souring the investment climate in Jakarta and other
provinces.

He said illegal levies imposed by Jakarta administration
officials also were helping to turn away investors.

"As long as the illegal levies are rampant, Jakarta and other
regions in Indonesia will not attract investors. Investors will
find other countries to invest their money," said the councillor.

Economic observers say the Bali bombings that killed about 200
people significantly worsened the investment atmosphere in the
country, with investors becoming increasingly worried about
security here.

Hari, however, expressed confidence that investment in the
capital would pick up because of Jakarta's proven ability to
ensure security.

"I think the investors now are still wait and see. They will
come here after they are convinced that security is good," he
said.