Domestic companies told to invest abroad

Domestic companies told to invest abroad

JAKARTA (JP): The government is encouraging private companies
to invest abroad to control global distribution and marketing
networks, Minister of Trade Satrio B. Joedono said yesterday.

"For this reason, it is necessary to abolish a common
perception that all kinds of investment overseas by domestic
companies are just the same as capital flights," Joedono said at
a two-day seminar organized to coincide with the 1995 Indonesian
Product Exhibition at the Jakarta Fairground here.

The minister explained that Indonesian companies need to
expand their production and marketing networks if they want to
become global companies.

"To become a global business, a company has to be able to
produce and sell its products anywhere with standardized after-
sales services," Joedono said.

He noted that the essence of the globalization is de-
integration of both production and marketing processes, by
spreading the processes into different countries to benefit from
their comparative advantages.

By expanding the production and marketing processes abroad,
the minister said, Indonesian companies will be able to globalize
their products.

Currently, Indonesia has only five global products --
garments, textiles, shoes, telecommunication equipment and toys
-- all of which contribute more than $1 billion in revenues per
annum to the government.

The minister acknowledged that trade policies have been
concentrated on goods trading and therefore the policies stressed
production globalization rather than marketing globalization.

"In marketing globalization, we put more stress on overseas
market access for Indonesian products rather than on making
Indonesia a part of the global market for foreign companies,"
Joedono said.

Protection

To protect Indonesia's market, the minister said the country,
in accordance with the World Trade Organization, limits its
import tariffs to no more than 40 percent, not including
agriculture and automotive products.

"The average level of our tariffs when the commitment was made
in March 1994 was already as low as 20 percent," Joedono said.
Therefore, Indonesia can still increase its tariffs to the 40
percent level when it deems it necessary to protect its market.

Joedono stressed, however, that Indonesia would continue to
reduce its remaining high tariffs as low as possible because low
import tariffs will encourage more trade, including exports.

Since the last deregulation package was introduced in May,
Indonesia's tariffs have averaged 15 percent and by 2003 should
go down to a maximum level of 10 percent.

Joedono said Indonesia also limits its WTO commitment on the
liberalization of trades in services to five sectors. They are
basic telecommunications, maritime transportation, tourism,
construction and financial services.

"The retail sector, however, remains closed to foreign
investment," Joedono said, adding that although Indonesia has
closed the sector, it welcomes the participation of foreign
retailers here through the franchising mechanism.

The government, he stated, will maintain its policy on the
retail sector until Indonesia is ready to accept the entrance of
foreign investors into the sector.

"If it is time to open the retail sector to foreign investors,
the government will first consult with those involved in the
retail business. The decision will largely depend on the results
of the negotiations between the government and domestic
retailers," Joedono said. (rid)