Indonesia, Japan to hold crucial talks on economy

Indonesia, Japan to hold crucial talks on economy

Dadan Wijaksana, The Jakarta Post/Jakarta

The government will host a high-level discussion on matters
concerning the economy with a visiting delegation from Japan on
Monday, with a search for ways to improve the investment climate
in this country likely to be high on the agenda.

The meeting, to take place when the country is preparing for
the second-round presidential election in September, will be
chaired by Ministry of Foreign Affairs Director General for Asia
Pacific And Africa Makarim Wibisono.

"The Japanese delegation, meanwhile, will be spearheaded by
the country's deputy foreign minister, Ichiro Fujisaki," Ministry
of Foreign Affairs spokesman Marty Natalegawa told The Jakarta
Post on Friday.

Marty declined to disclose the detailed agenda for the
meeting, saying only it would form part of government efforts to
bolster further the bilateral economic relationship with the
world's second-largest economy.

"Japan has always been an important partner for Indonesia in
so many ways: economy, trade, investment, and so on," he said,
although he did not know whether similar meetings with other
countries would also take place in the near future. Japan is the
country's largest export market and one of the largest investors
here.

However, Dow Jones, quoting a diplomat at the Japanese foreign
ministry, reported that discussions would center on seeking
clear-cut measures to improve the business environment in the
country.

The outcome of the discussions will be in the form of a
recommendation, or a list of actions to be carried out by
relevant ministries or agencies.

Investment, especially offshore, has been lagging in Indonesia
as compared with neighboring countries, mostly due to the adverse
business climate here.

Investors have been complaining about various conditions that
are detrimental to investment, including a lack of legal
certainty, widespread corruption, inefficient bureaucracy and
labor disputes. For Japanese investors, who invest mostly in the
manufacturing sector, tax-related issues have also become a
problem.

Before the crisis, investment was one of the country's main
economic growth drivers.

At present, however, it accounts for less than 15 percent of
growth in the country's gross domestic product -- an indicator of
economic growth -- with domestic consumption contributing more
than 75 percent.

Analysts have said that a failure to attract more investors to
the country would mean that Indonesia could not achieve more
robust economic growth, and would have to settle for a mediocre
growth level of 3 percent to 4 percent per year -- as has been
the case for the past four years.

While it remains to be seen what output the upcoming meeting
can deliver, it should represent a good step toward progress in
improving the business and investment environment, especially as
Japan has been a long-time major investor in the country.

The latest data from the Investment Coordinating Board (BKPM)
says that during the January-July period, Japanese investors
topped new investment approvals in the country. Around US$916
million-worth of new investment approvals were recorded from
Japan during the period, accounting for about 28 percent of total
approved foreign investment, which stood at $3.3 billion.