Japanese investors
The outright rebuttal by State Minister of Investment Sanyoto Sastrowardoyo of Japanese businessmen's complaints about red tape, import tariffs, customs services and taxation in Indonesia is understandable.
After all, Sanyoto can support his statement with a very impressive record of foreign investment approvals over the last two years. In the first semester alone, total investment approvals already exceeded US$20 billion, or almost the amount for the whole of last year.
The Japanese investors' complaints were cited by the Japan External Trade Organization (Jetro) from a survey of 931 Japanese investors already operating in Indonesia, Malaysia, Singapore, the Philippines and Thailand. The survey, conducted last November and December, was designed to gather the views of Japanese businessmen regarding the reasons for their operations in those four countries and any problems they encountered.
Jetro, being responsible for promoting not only Japanese exports but also investments overseas, has regularly conducted surveys to gather input on how to further help Japanese investors and exporters. The November, 1994 survey, for example, was made to update the data Jetro collected from its previous survey in 1992. Hence, the survey was well intentioned and was not in anyway aimed at singling out Indonesia as the target for criticism.
Set against this background, we think it is unwise to simply disregard the findings of the survey. We should take pride in the steady increase in licensed foreign investments. That obviously reflects investor confidence in the prospects of Indonesia's economy.
But we should also acknowledge that in so far as Indonesia is concerned, licensed investment is one thing and realized investment is quite something else. Our balance of payments, for example, shows that actual direct foreign investments in 1994, though larger than those in 1993, totaled only $2 billion.
Moreover, the Japanese businessmen's complaints about red tape, import tariffs, customs services and taxation actually are not completely new. European and American businessmen in Indonesia also have often raised similar complaints. In fact, American businessmen see the way tax officials assess corporate tax obligations as one of the biggest problems they encounter in the country. Even Indonesian businessmen, supposed to be more tolerant about such problems, also have often voiced such complaints.
True, the packages of reform measures launched since 1985 have significantly improved the business climate in Indonesia. But what government officials often do not realize is the fact that other countries also have been taking such measures and they are often much better than Indonesia in enforcing the reforms.
We think that instead of rejecting the findings of the Jetro survey outright, it is perhaps better for Sanyoto and his office -- the Investment Coordinating Board (BKPM) -- to get a copy of the complete report on the survey's findings to be used as valuable input for introspection.
There are several other findings of the survey which could greatly help the BKPM in further promoting foreign investments in the country. The survey, for example, reasserts the acute shortage of middle level managers in Indonesia and discloses that many Japanese investors look at Indonesia not as an export base but rather due to the major potential of its domestic market. The survey also reveals that quite a number of investors are interested in relocating their plants to Indonesia to take up the opportunities created by the government ruling on local contents for various industrial products. These findings and others about labor wages, incentives, infrastructure and many other issues can provide valuable input for the BKPM.