Japan investors see Indonesia as less attractive

Japan investors see Indonesia as less attractive

JAKARTA (JP): Japan sees Indonesia as being less attractive than China, the United States and Asia's newly-industrialized countries for the expansion of its industrial investments, an economist says.

"Japan is less attracted to Indonesia because Indonesia has no strong industrial tradition which supports efficient operations," Mari Pangestu, the chief economist of the Center for Strategic and International Study, told an annual assembly of the Indonesian Association of Electronic and Electrical Home Appliances Industries at the Shangri-La Hotel yesterday.

Quoting the results of a survey on the interests of Japanese investors prepared by the Japan External Trade Organization, Mari said that China topped the list of countries most attractive to them for making overseas investments, with a score of 58.1 percent among 625 companies being interviewed.

The survey was made in August 1993.

Based on the polling, only 13.4 percent of the interviewed companies saw Indonesia as an attractive country for investment, while 15.8 percent of them chose the European Community countries, 15.7 percent the United States and 15.7 percent Asia's newly-industrialized countries -- Hong Kong, Singapore, South Korea and Taiwan. Malaysia won 13.3 percent of the investors interviewed.

According to the survey, two of the Indonesian industrial lines, steel and fiber industries, gained good points at the polling, getting 41.2 percent and 27.8 percent, respectively, of the Japanese investors' preference.

In the steel and fiber industries, China won 70.6 percent and 83.3 percent respectively, she said.

In the chemical and food industries, Indonesia came third after China and the United States, with a gain of 25.2 percent of the polling for chemical business and 14 percent for the food industry, she added.

Electronics

Mari also said that the Japanese companies saw Indonesia less attractive for investments in the electronics industry. "At least 51.3 percent of the companies chose China, 20 percent European Union countries, 16.3 percent the United States, 15 percent Malaysia and 12.5 percent Asia's newly-industrialized countries," he said, adding that only 10 percent picked Indonesia.

Referring to electronics, she expressed her concern that Indonesia has not thus far developed the semi-conductor manufacturing, which has potential to foster the electronic industry.

"I have found that Indonesia has developed the production of consumer electronics, which relies very much on assembly activities, instead of manufacturing components," she said.

"For me, the absence of semi-conductor manufacturing clearly shows that Indonesia has no strong base in the electronic industry," she told reporters after yesterday's assembly.

She said that Indonesia also has not developed the manufacturing of various components. "In the radio industry, for example, Indonesia's ratio of local contents reached only some 20 percent, as compared to the 80 percent reached in Malaysia and Singapore," she said.

"Consistent deregulation is, therefore, required to push the development of the electronics industry," she added.

Fadel Muhammad, chief of the industry department of the Indonesian Chamber of Commerce and Industry, said that Indonesia needs to strengthen the component industry.

Minister of Industry Tunky Ariwibowo said in his speech at yesterday's meeting that the government will prioritize the development of certain industries, such as wood, textile, electronics, engineering and handicrafts, in the next five years.

The electronics industry contributes some Rp 2 billion in export revenues per year. Indonesia thus far has 297 electronic manufacturing companies, of which 78 produce consumer electronic products, 156 industrial electronics and 63 components. (fhp)