Government fiddles while Sony runs, unemployment figures set to soar

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.