Govt to cut graft to attract Japan investment
Govt to cut graft to attract Japan investment
JAKARTA (JP): An American academic has said that the
Indonesian government needs to reduce both corruption and
bureaucratic red tape in order to create a "long term investment
climate" attractive to Japanese industries seeking to relocate to
the region.
"The Indonesian government must cut red tape and
corruption ... and continue to liberalize the economy in order to
attract the relocation of Japanese firms," Hugh Patrick, an
expert on the Japanese economy from Columbia University's
business school in New York City, told a seminar at the Jakarta's
Center for Strategic and International Studies (CSIS) yesterday.
The seminar, held in honor of the 50th anniversary of
Indonesia's independence, was attended by various prominent
figures, including U.S. Ambassador Robert L. Barry, Australian
Ambassador Allan Taylor, economists Mari Pangestu, Hadi Soesastro
and H.S Dillon and a former Indonesian ambassador to Japan,
Hasnan Habib.
Patrick's warning on graft and red tape comes close on the
heels of a survey which rated Indonesia the third-most-corrupt
country in Asia, after China and India. The results of the survey
of foreign managers, which was conducted by the Hong Kong-based
Political & Economic Risk Consultancy, were quoted recently by
the Economist magazine.
In a related development, several local observers have been
critical of Indonesia's latest economic deregulation package,
announced last month, calling it confusing and contradictory. The
sections of the reform package dealing with sectors closed to
foreign investment have been singled out for special criticism.
Government figures on foreign investment approvals paint a
different picture, however, recording US$15.6 billion in approved
foreign investments during the first four months of this year.
Approved foreign investments in 1994 were recorded at $23.7
billion, up from $8.1 billion in 1993. Japanese investment in
Indonesia remained the highest last year, reaching $18.6 billion
or 20 percent of all foreign investment in the country.
Manufacturing
Patrick said yesterday that the rise of the yen against the
U.S. dollar would prompt Japanese firms to relocate their
industrial activities to Southeast Asia and China in order to cut
costs.
Reports from Tokyo's money market yesterday said that the
greenback stood at 84.74-84.77 yen in the late afternoon, as
compared with 83.25-83.30 a day earlier.
"The appreciation of the yen will force Japanese industries,
especially the labor-intensive manufacturing sectors, to move
their production bases to other places offering lower costs,"
Patrick said.
Patrick said that the labor-intensive manufacturing sectors
were chiefly medium-scale suppliers of various components or
parts for large manufacturers.
Such suppliers are usually either owned by independent medium-
sized firms or are smaller units of the manufacturing
conglomerates themselves, he said.
"To save costs, those who are able to move will go to this
region...that's why Indonesia must be ready to anticipate this
trend," he said.
The trend, Patrick added, would create both employment
opportunities and ownership opportunities for Indonesia.
"Ownership opportunities mean that it is now possible for
Indonesian firms to take the role formerly played by the
suppliers in Japan," he said.
Patrick said that, in order to take advantage of these
opportunities, Indonesia had to make significant investments in
improving its workforce to meet Japanese industrial standards.
(hdj)