Japanese investors urge RI to improve business climate

Dadan Wijaksana, The Jakarta Post, Jakarta

Japanese investors are joining calls for the government to improve the business climate here by implementing consistent legal reforms in various sectors, to prevent more investors from leaving for other countries.

The Jakarta Japan Club (JJC) and Japan External Trade Organization (JETRO) said that the country is experiencing debilitating weaknesses in its legal systems and its enforcement, saying they were not responsive to the business sector's demands.

Tsutomu Nakagawa, chairman of JJC, pointed out five legal issues that needed to be addressed immediately, because they had caused a decline in investor confidence.

"They are tax services, customs procedures, settlement of labor problems, investment law and law enforcement. The government should address these to secure foreign investments," Nakagawa told a seminar on Friday.

He was speaking on the last day of a two-day APEC symposium on strengthening the economic legal infrastructure.

Chairman of JETRO Noboru Hatakeyama also acknowledged the same problems: "Law enforcement has been a major obstacle due to lack of expertise and human resources. And to establish a system of professional qualification, a national level examination would be useful to improve human resources in enforcement."

The remarks were the latest plea coming from investors, whose confidence has deteriorated rapidly by the unfavorable business climate, which has cost the country dearly due to a sharp drop in investment.

Japan has long been one of the largest contributors in terms of investment in the country.

JJC alone functions as a Japanese Chamber of Commerce and Industry and covers around 1,000 Japan-affiliated companies and representative offices that operate in Indonesia.

According to a survey, Indonesia has continued to fall further behind China and Thailand in the competition for Japanese investments, and it could be overtaken by Vietnam and India if it does not take immediate steps to improve its investment climate.

The survey was conducted by the Japan Bank of International Cooperation (JBIC).

China has become a favorite investment destination for Japanese investors because its government has been actively providing various incentives, in addition to the favorable investment climate and the availability of cheap and high quality raw materials.

The latest data shows that foreign direct investment (FDI) approvals in Indonesia during the first five months of the year experienced an almost 60 percent drop, compared to the same period the year before.

Regaining foreign investment is absolutely vital for the recovery of the country's economy.

Analysts have said that while competition among many Asian countries for Japanese investment had been tight, Indonesia had done very little to attract Japanese investors.

In the area of taxes and customs, foreign investors have been the subject of many abuses of irrational interpretations of tax laws and regulations, Nakagawa said.

"For correct implementation of laws and regulations, disclosure to the public must be secured. There must be ample time for disclosure, and also training of officials before implementation," he added.

Indonesia has also been lagging behind in providing investment incentive systems, such as tax incentives, compared with other countries.