Govt, Japanese firms discuss investment crisis
The Jakarta Post, Jakarta
The government and leading Japanese business organization met on Tuesday to discuss ways of improving the country's difficult investment climate just as Japan's top electronics producer Sony Corp announced it would close its Indonesian manufacturing subsidiary.
The Jakarta Japan Club (JJC) brought together Japanese firms, the Japan International Cooperating Agency (JICA) and the Japan External Trade Organization (JETRO) for the meeting with senior government officials.
"We need to identify problems and seek solutions together so that Indonesia's investment climate can be improved," said Coordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti in a statement on Wednesday.
"The challenge lies in how to overcome the technical problems that are often encountered by investors," he said.
Tuesday's meeting, however, came at the same time as Japan's Sony Corp. announced it would cease manufacturing operations in Indonesia as part of a global strategy to boost efficiency.
Sony's withdrawal, which will entail the laying off of some 1,000 workers, underscores the difficult climate in which companies have been operating here.
No specific reason was given for Sony's pull-out, but industry sources pointed to rampant smuggling, an unfavorable tax regime and an unruly labor movement as the most likely causes for the decision.
Japanese companies rank among Indonesia's long-time investors with interests in the manufacturing, service and infrastructure sectors.
But after the 1997 economic crisis, the investment climate here took a turn for the worse and more capital has been leaving the country than coming in since then.
While Indonesia's macroeconomy has stabilized somewhat, old problems such legal uncertainty, political instability and security issues continue to cloud investment prospects here.
From January to September of this year, foreign direct investment (FDI) approvals fell by 11 percent to US$5.4 billion from $6.08 billion in the same period last year.
Over the same period, domestic investment approvals recorded an even steeper drop to Rp 15.99 trillion (about $1.77 billion), down 70 percent from last year's figure.
The regular JJC meetings with the government are aimed at addressing pressing investment problems. Japanese businessmen grouped in the JJC meet senior government officials every three months, with the first meeting being held last January.
The discussions cover investment issues, which have been assigned to a number of sub-commissions dealing with, among other things, customs and excise, tax, labor, investment promotion, the development of component industries, and issues concerning the power sector.