French envoy discusses investor staying power

French envoy discusses investor staying power

Berni K. Moestafa
The Jakarta Post
Jakarta

According to French Ambassador to Indonesia Herve Ladsous,
French companies are here to stay. Neither the 1997 economic
crisis nor the subsequent political turmoil that ended a three-
decade authoritarian regime could scare them away.

Most companies, Ladsous said, decided to stay. "Some developed
their businesses very substantially during the crisis."

Indonesia's economy may be recovering painstakingly slow, but
French success stories abound.

"I open my eyes when I travel to Jakarta; I see more and more
French cars," Ladsous said, referring to the shiny new Peugeots
and Renaults jostling for space on Jakarta's crowded streets.

Then he related how French consumer goods company Danone
bought Indonesian-owned, bottled water producer Aqua in 1998.
That move overnight made Danone the world's largest bottled water
producer.

He added that Carrefour had, on average, been opening at least
two new hypermarkets in Jakarta per year. "This year they plan to
open outside Jakarta," he said. However, some critics say the
French retailer is a bit too successful, biting deep into local
retailers' market share.

Outside the consumer sector, Ladsous pointed to the world's
fifth-largest oil company, Totalfina. Its gas operation in East
Kalimantan is now a major contributor to the country's liquefied
natural gas (LNG) exports.

On the bilateral level, he said last year's trade figures had
returned to their precrisis level. Indonesia booked 1.2 million
euros in exports to France, a surplus of some 450 million euros.

Like other countries, French success here is largely being
driven by the purchasing power of the world's fourth-largest
population.

Their success stories, however, emerge as the country still
reels from the economic crisis that struck the Southeast Asian
region in 1997.

Indonesia's banking sector nearly collapsed under a wave of
insolvent companies as the rupiah nose-dived against the U.S.
dollar. None has fully recovered since.

The economic crisis escalated into a political one, which led
to the downfall of president Soeharto's regime in 1998.

Efforts to bring the economy back to its feet have risen and
fallen along with turbulent political developments. Economic
recovery has since been slippery, and slow at best.

But, as Ladsous said, French companies survived. Some are even
performing better than they were before the crisis.

"It's important to note that French investors always
maintained a positive view on Indonesia. Even at the height of
the crisis, most did not chose to shut up shop in Indonesia.
That, of course, was a display of confidence in the future of
Indonesia," Ladsous explained.

Investors have also been heartened by the political situation,
which finally regained some level of stability under President
Megawati Soekarnoputri.

This has made the investment environment more predictable than
in the years under presidents B.J. Habibie and Abdurrahman Wahid.

Analysts, though, have warned of precarious stability as a
result of slowing political reforms, in particular within the
military.

Ladsous did not seem to mind. "I think, in my years, I have
seen a lot of progress made in terms of consolidation within the
political situation," he said.

He witnessed the amendment of the 1945 Constitution last year,
and a year earlier saw how the country implemented a bold
decentralization program under regional autonomy laws.

However, as power becomes more evenly spread, so does company
interaction with authorities. New rules need to be learned, and
for many it has been a difficult experience.

Ladsous said that French-based tap water company PT Lyonnaise
Jaya ran into a wall in calling for higher water tariffs from the
Jakarta's city council. The company was not making any profit, he
said.

Nonetheless, his conclusion was, "people are doing quite
well."

So when he was asked how the French would do over the next
five years, his answer, naturally, was they would do even better.

"You can look at more being done in the field of retail
businesses and manufacturing, including the automotive sector.
There are also a lot of medium-sized enterprises. And we also
have furniture, handicrafts and jewelry," he said.

French businesses here apparently do not worry him so much.

He is more concerned about Indonesia, worried this country is
not doing enough to help itself. "I am saying the progress is
real, but not sufficient."

He wants to see the country's unemployment rates falling, its
debts declining and its economy growing faster, yet in a way that
is sustainable. The French envoy was particularly concerned about
Indonesia's poorly managed maritime and forest resources.

The inaction is reflected in the lack of growth in the economy
to cut unemployment rates and lift millions of Indonesians out of
poverty.

Ladsous said that only a 7 percent economic growth rate would
do the job. Indonesia's economy has been growing by just 3
percent to 4 percent per year.

The missing 4 percent in growth should have largely been met
by greater investment spending. But government resources are tied
to servicing the country's massive debts. A shaky banking sector
and the large number of companies still indebted five years after
the crisis have rendered many local investors impotent.

Ladsous urged Indonesia to work hard to woo foreign investors.

"You need to be attractive; not only attractive per se but
more attractive than your competitors," he said.

Investors, he added, look for two things: profit and security.

"Profit, I think, is not an issue here, because many
businesses are profitable," he said.

Security or the lack thereof posed a more underlying threat to
investors, Ladsous said. By that he did not mean the threat of
terrorism, although it did have an adverse impact on investment.

The lack of legal certainty was a matter to which he drew
attention.

"Corruption remains a big, big problem within this country.
When you try to get foreign investors to come, that is obviously
one question that immediately springs to their minds."

Asked if that was holding back French investors, Ladsous
replied, "maybe not so much holding back, but, as I said, the
legal framework needs to be consolidated."

"The more solid the legal framework, the greater investor
confidence will be," he said.