By Dr. Gerhard Fulda

By Dr. Gerhard Fulda
Ambassador of The Federal Republic of Germany

Indonesian history of the past six years is notable for the huge
overall turbulence and change.
Only a few countries have faced so many diverse and complex
problems at once: the economic crisis of the late 1990s, the big
political changes after the end of Soeharto's 32-year-long rule,
separatist conflicts. But taking a look at Indonesia means, most
importantly, to dare glance at the future and see what there
might be in prospects for political and economic developments.
It is impossible to give an exact forecast when the changes from
an authoritarian to a democratic government will be completely
finished, but there is one most important trend which I can point
out as the driving force behind all future processes: The
political will to use power respecting fundamental democratic
rules.
The first step in this direction has been done by reshaping the
distribution of political power and the reforms of the
Constitution. The result is a much better balanced system. The
omnipotent People's Consultative Assembly (MPR) now has
restricted powers, installing the Council of Regional
Representatives (DPD) as a second chamber gives way to further
decentralization and building up a constitutional court gives law
a better juridical basis.
Furthermore, the public has now gained a voice again by
reintroducing the democratic fundamental rights of freedom of the
press and freedom of expression. People's needs and hopes can be
articulated openly and so further democratic developments can be
fostered.
Another positive sign has been the peaceful change of government:
the turbulence of 1998/99 in mind, this comparably harmonic
change can become a good example for future elections. As a
particularly important trend, I see the ongoing reduction of the
role of the centralized state. More and more companies are
privatized and continuing decentralization is noticeable at the
political level.
This clearly has a positive impact on the political, cultural and
development cooperation. The global confidence in Indonesia that
was undermined in the last years of the Soeharto era can be
rebuilt by this positive democratic progress.
In the longer run this might be true for bilateral economic
relations as well, even if we experience an overall instability
right now: If you compare the trade numbers in the period
January - July 2001 and January - July 2002, imports from Germany
to Indonesia fell 27 percent and exports to Germany lost 11
percent.
Even so, Germany changed went from eighth to seventh among
Indonesia's trade partners, which is a clear sign that reduced
import-export numbers are only a cause of global recession and
not a demonstration of mistrust by German investors. They are
here to stay.
Only a few German firms left the country during or after the
Asian crisis. German investments are focused on
chemicals/pharmaceuticals, automotive, logistics, manufacturing,
financial services (banking and insurance) and
telecommunications, with new investments in the past three years
mainly in the areas of cement industry, automotives (lubricants
and car manufacturing), IT, manufacturing,
machinery/maintenance, as well chemicals/pharmaceuticals.
German companies follow long-term strategies, and it is not their
business philosophy to pursue the "quick buck". Their approach
vis-`-vis Indonesia has naturally been more cautious over the
past years, in a way reflecting the overall "wait and see"
position of many foreign investors. However, they are still
willing to take up the challenge to invest in Indonesia,
appreciating the growing political stability and the economic
potential of the country.
It is quite simple to define framework conditions for German
investors and, of course, investors from different countries
which lead to an attractive investment climate: good governance,
a sound legal system, transparent and efficient administrative
procedures, a strong private sector, available and affordable
financial services.
The government of Indonesia has achieved a lot during the past
and we appreciate the efforts at the macroeconomic level, such as
fiscal consolidation, the stable rupiah, control of inflation,
withdrawal of subsidies reform and restructuring of the
financial, public and corporate sectors, as well as microeconomic
areas, including the labor law, strengthening of small and medium
sized companies in the private sector.
However, in the abovementioned areas, there remains room for
improvement and it would also help to avoid bad publicity which
has raised many eyebrows in western business circles, such as
Semen Gresik, Manulife and trademark disputes (Reemtsma
Davidoff), to name a few.
I think that prospects for future German investors in Indonesia
are good. Still, it is very important to acknowledge the special
circumstances this country has to deliver. The conditions for
investments are different from European surroundings and those
differences have to be taken into account. Prospects as well
depend on which area the investments are intended, so profound
analysis of market and production conditions are necessary.
Sources of information are plentiful, including the
German Embassy, Indonesian-German Chamber of Commerce and
Industry (EKONID), delegation or individual visits, and the
German Foreign Trade and Investment Information Agency.
In the end, it comes down to entrepreneurial skills and the
willingness to take on challenges. Once a company has decided to
come to Indonesia, it will know what there has to be done to
bring down the risks to an acceptable level. Uncertainties will
always remain but that is what doing business is about.
The German Embassy encourages German companies to make the
assessment themselves. We have good examples of German companies
who have not regretted taking that step to Indonesia since the
onset of the 1997 Asian crisis. Indonesia is better than its
image and does offer good business opportunities. And who says
there is an emerging market where it is only easy going?
I am optimistic about the prospects for Indonesia in the next
three years to five years. The democratically elected government
will be in "full swing" and will get ready to prepare the next
elections. It is essential that foreign investors are given a
better legal and juridical basis for doing business in Indonesia.
Finally, the regions will enjoy more political weight due to a
successfully implemented decentralization. The result should be a
more harmonious and stable relationship between the central power
and regions under the unitarian Indonesian state. The will for
changes exists, now it is only for the will to materialize.

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