Invisible costs discourage investors
By Arif Suryobuwono
HONG KONG (JP): Indonesia remains an appetizing investment destination for the Hong Kong business community, but long strings of invisible costs have left a bad taste, says an official of the Indonesian Consulate General.
Economic affairs consul Fadillah H. Nurwawi said here that payoffs, starting with airport customs officers and reaching down to neighborhood community offices near the investment projects, make it difficult for Indonesian officials to convince Hong Kong investors that investing in the country is not a headache.
"It is our job here to attract as many Hong Kong businesspeople as possible to invest in Indonesia, but words often stick in our throats when the investors confront us with the ugly costs," Fadillah said.
Fadillah said examples of the invisible costs varied from bribes demanded by local Army officers to the cost of waiting years for import tax refunds worth millions of dollars.
He said although Hong Kong investors basically look for low labor costs, they would rather pay the yearly wages hikes than the invisible costs of corruption.
Compared to the invisible costs, the increase in labor wages is minimal, Fadillah added.
His comments were made in connection with a one-day seminar being held today at One Pacific Place to discuss investment opportunities in Indonesia and the current investment environment.
Indonesian State Minister of Investment/Chairman of the Investment Coordinating Board (BKPM) Sanyoto Sastrowardoyo will tell seminar participants about the latest deregulation package and economic development in the country.
Sanyoto will be accompanied by 17 Indonesian businesspeople looking for Hong Kong partners to set up joint ventures in Indonesia. The keynote speaker from Hong Kong will be Patrick K.K. Tang, executive chairman of KTP Holdings Ltd.
Tang's company operates in Bekasi, West Java, under the name Kong Tai Indonesia. It produces shoes and employs 11,000 workers.
The seminar is jointly organized by the consulate general, BKPM and the Chinese Manufacturers' Association of Hong Kong.
Fadillah said Sanyoto might announce the government's plan to introduce another deregulation package next month.
Fadillah said the invisible costs will soon make it hard for Indonesia to compete against Vietnam, Myanmar and East European countries, all of which offer generous incentives to investors.
From 1967 to May 4 this year, Hong Kong, with accumulative investment commitments of US$18.0912 billion in 343 projects, ranked the third largest investor in Indonesia after Japan ($31.4678 billion in 853 projects) and Britain ($23.0825 billion in 187 projects).
Most Hong Kong investments are in the textile industry (55 projects), the metal industry (36 projects) and trading (35 projects).