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.