Government fiddles while Sony runs, unemployment figures set to soar
The Jakarta Post, Jakarta
Businessmen criticized the government on Wednesday for failing to resolve domestic industrial problems, which, they said, had prompted foreign investors, such as Japanese electronics giant Sony Corp., to pull out of Indonesia.
Classic problems, such as labor strife, illegal fees and charges, and rampant smuggling, which to date remained unsolved, had resulted in Indonesia losing its competitiveness in the foreign investment stakes.
"Investors would prefer to invest their money in countries that have low production costs, good labor relations, as well as sound financial systems," Soy Pardede, executive director of the Indonesian Chamber of Commerce and Industry (Kadin), told The Jakarta Post on Wednesday.
"The investment map is changing. There are better markets than Indonesia now, particularly China," Soy remarked.
Soy was commenting on the recent bombshell dropped by PT Sony Electronic Indonesia, a subsidiary of Sony, which has decided to close down its audio plant in Indonesia.
So far, PT Sony Electronic Indonesia officials remain tight- lipped about the real reason behind the closure.
Noted businessmen Aburizal Bakrie urged the government to quickly restore the investment climate in Indonesia to prevent a mass exodus of foreign investors from the country.
"The government should not downplay decisions by labor- intensive companies to close their factories here and move abroad. We need them here to absorb our huge number of unemployed," he said as quoted by Antara.
The Sony decision comes as a bitter blow for Indonesia as it further strengthens the image of the country as no longer being an attractive investment destination.
It also raises fears that other major foreign investors might follow Sony's lead and pull out of Indonesia.
The planned closure has also caused jitters in the government, which pleaded with Sony on Wednesday to reconsider its plan.
Vice President Hamzah Haz called on Sony to maintain its Indonesian manufacturing operations, saying that the pullout would hurt the country's economy, which has been struggling to cope with record unemployment.
"It is already hard now. We have 40 million people unemployed, so we hope that the closure won't take place. But, off course, they have made their own calculations and analysis regarding their business," Hamzah said as quoted by detik.com news internet portal.
"If this goes ahead, it will be a bad advertisement for Indonesia," he admitted.
Meanwhile, Minister of Industry and Trade Rini Soewandi said that the government was still trying to find out why Sony's Indonesian operation was on the list of Sony subsidiaries to be axed.
Rini said that she had met with Sony management to get a detailed explanation on the closure plan.
However, she played down the impact of the closure on investment in Indonesia saying: "This will not affect investment in Indonesia as Sony's operations here are not big and the closure is part of its global plan."
Sony in its announcement on Tuesday said that the plan was part of the company's global strategy to consolidate its business worldwide by cutting the number of its plants from 70 to 54 so as to achieve greater efficiency.
The planned closure is expected to take effect in March 2003 when Sony will transfer its production lines to its Malaysia plant, a process that has been taking place gradually since 2000 after Sony experienced a protracted labor row here.
However, Rini admitted that the opaque tax system and labor issues had discouraged foreign investors from putting their money in Indonesia.
Earlier on Tuesday, Coordinating Minister for the Economy Dorodjatun Koentjoro-Jakti told Japanese businessmen that the government was committed to luring back foreign investment.
In the meeting, which was the latest in a series of regular meetings with the Jakarta Japan Club (JJC), Dorodjatun gave assurances that the government would help Japanese businessmen to deal with the problems they faced, such as customs clearance and labor issues.