Japanese investors need clear message
Indonesia is seeking to reschedule some US$5.5 billion of its sovereign debt maturing this year and in 2003, from the Paris Club of creditor nations. Japan, the biggest country lender to Indonesia has indicated its readiness to discuss the issue with President Megawati Soekarnoputri's government, if Indonesia is able to meet all the required conditions.
In an interview with The Jakarta Post's Kornelius Purba, Nobuo Hazeyama, the chief representative of the Japan Bank for International Cooperation's (JBIC) Jakarta office, shared his view about Indonesia and the result of the bank's recent survey on investment in a number of countries including Indonesia. His office is in charge of overseeing the disbursement of all his country's official loans to Indonesia.
Question: Finance Minister Boediono has disclosed the government's intention to reschedule some $5.5 billion of its loans with the Paris Club this year. What will be Japan's possible response?
Answer: First, this is a problem between the government of Indonesia and Japan. However Japan fully understands your government's situation and is very willing to extend its help. So I am not pessimistic, although I cannot say I'm optimistic, that your government will get what it wants. Indonesia is too important to be ignored. But I think your government must be able to fulfill tough conditions to get the new concession.
Q: Indonesia and Japan have agreed to revive the four stalled megaprojects, including Chandra Asri and the Paiton power plant. Your bank is also involved in financing some of them. What is the significance of the projects resuming?
A: I do hope this will be a good sign that those projects will benefit the economy of this country. And still, this is more than I expect. But only solving old problems would not be convincing enough for Japanese companies to make new or expanded investments. That is very sad, and this again indicates the problem of images and weakening of the economy. To solve the old problems and think of starting to work ahead are quite important elements ... Your government can have more self confidence if they can carry out these projects.
Q: Can these projects be resumed this year?
A: I hope so. Basically they have reached agreements, and this is the year of implementation.
Q: From your bank's survey we understand there are many complaints about the lack of transparency, corruption and poor law enforcements in Indonesia. Can you specify more?
A: It is unfortunate to say that because the current confusion is accompanied with this transition period some people say that corruption is worsening compared with before. This is a unique situation. Of course I don't believe there is no corruption in other countries, but it is still quite clear that such corruption cases are decreasing in other countries ... Some people say corruption is increasing here because there are so many stakeholders at this moment. Previously there was just one (ruler), so when someone said yes then it was OK.
But now you have to go to the central government, and then regional governments. I don't say that this situation adds corruption -- but you are always asked for some contribution. Whether it is corruption I do not know, but still it is additional cost for companies. That is the image.
Q: But how about possible corruption practices in the disbursement of Japanese official loans to Indonesia?
A: We do not have any problem with corruption, because our financing system is project by project. When some contractors make progress, then the consultant will check the quality of the work and Indonesian government will check it and then talk about it. So things are exactly according to the contract. Indonesian government gets quality work, so I don't believe there is the possibility of corruption with this process.
Q: Corruption has became an old issue in Indonesia, and Japanese companies have long experiences with this practices. So what is the confusion?
A: There were clearer rules in the previous governments. We do not know what the new rules, new regulations are. What is the relation between the central and regional governments, no one knows. Worse, your government says something, but some days later they change it. That happens.
(Indonesia's) transition is very big, even bigger than the Meiji restoration. So some confusion is quite unavoidable. But it is really difficult for profit making companies to wait for 10 years to 20 years.
It is important that there will be a clearer message. There are so many bills which have been presented to your legislature waiting for decision making. But still the bills are still in there and we not know when they are to be decided, including the new investment bill.
(Ours) was a survey study, it is very subjective and not based on concrete facts or information, and this is more difficult because the survey is on images. To change an image is very difficult. If you believe something, how can I change that? People are looking for a better place for business.
In this transition period there is no clear regulation or rules matching the new decentralization system. So we are facing problems. That kind of situation happens now.