High costs discourage investment: Deiss
Zakki P. Hakim and Riyadi Suparno, The Jakarta Post, Jakarta
High costs in the Indonesian economy remain the main barrier to attract foreign investment, including investors from Switzerland, according to visiting Swiss Minister of Economic Affairs Joseph Deiss.
Speaking to journalists here on Monday, Deiss said that a survey of Swiss businessmen in Indonesia revealed that they find investment here promising, but they also continue to encounter innumerable problems investing here.
Lack of protection for intellectual property rights is one of the main problems, Deiss said, noting that the presence of so many counterfeit products here discourages foreign investors.
Also, the continuing poor law enforcement has been driving away foreign investment.
The next problem is related to governance in the public sector, especially the inefficient bureaucracy.
"To acquire a business license, for example, it takes about 150 days now. The government has realized this problem and has promised to reduce it to 30 days at most," Deiss said.
He added that he raised these concerns of Swiss businessmen during his meeting with various government officials, including trade minister Mari E. Pangestu.
Deiss also noted that many Swiss-based multinational companies were interested in investing in the country, especially following the positive improvement after the reform movement that brought down the corrupt New Order administration.
However, democratization itself is not enough, this must be followed by reform in the bureaucracy and improvement in security, he said.
Basically, he said Switzerland's private sector would invest in places that promised the best earning and met the five basic requirements to attract investment.
They include available estate and grounds to do business, flexible labor market, availability of adequate infrastructure, domestic security and safety and efficient tax system.
"In order to compete with other countries like China, Indonesia must overcome at least four of the five issues," he said.
Swiss direct investment in the country has reached more than $1.5 billion in Indonesia. The country of 7.3 million is among the 20 largest foreign investors and approximately 100 Swiss firms and joint ventures are operating in the country.
Among its top firms in the country are Nestle, Roche, Novartis, Clariant and ABB.
Aside from promoting investment, Minister Deiss also aimed to boost bilateral trade, which has been declining since before the financial crisis.
"Trade between the two countries has been considerably low since the 1997 crisis," he said.
According to data from the Swiss government, Switzerland's total exports to Indonesia stood at 286 million Swiss franc (US$343 million) last year, down from 289 million franc in 2003 and 381 million franc in 1997.
Imports from Indonesia meanwhile were valued at only $157 million franc last year, compared to 167 million franc in 2003 and 179 million franc in 1997.
"To at least reach a trade level we had before the 1997 crisis, it is important for Indonesia to promote its exports in the Swiss private sector," he said.
Indonesian exports to Switzerland are mainly textiles, garments, agricultural products, footwear and furniture.
To boost bilateral trade, Switzerland, along with three other countries in the European Free Trade Association (EFTA) -- Norway, Iceland and Liechtenstein -- is pursuing a free trade agreement (FTA) with Indonesia and other countries in the region.
"If we could do it at the multilateral level of the World Trade Organization, it would be best. But bilateral negotiations would certainly bring benefits for both sides," he said.