Japanese trade groups meet with Megawati

Adianto P. Simamora, The Jakarta Post, Jakarta

Japanese investors renewed calls on the government to immediately improve the investment climate here to encourage foreign investors to return to the country.

A visiting official from the Japan and Tokyo Chamber of Commerce and Industry (JCCI) warned that Indonesia had tough competition from fellow Southeast Asian countries and China to snag investments from Japan.

"Japanese companies are trying to make up their mind as to where their investments should go. They (Japanese) tend to decide on investment areas by measuring them against China," Nobuo Yamaguchi, the chairman of JCCI, told a news conference on Tuesday.

Officials from JCCI and the Tokyo Chamber of Commerce (TCCI) visited Jakarta to study the investment climate in Indonesia. The lobby groups will also visit the other member countries of the Association of Southeast Asian Nations (ASEAN). Their main mission is to compare the investment climate in ASEAN countries and China.

Japan is one of the largest sources of foreign investment in the country.

In Indonesia, the lobby groups on Tuesday met with President Megawati Soekarnoputri. They also held meetings with Coordinating Minister for the Economy Dorodjatun Kunjoro-Jakti and other economic ministers.

During the meeting with Megawati, the trade groups raised three issues that would help encourage Japanese investors to make new investments here. Those were minimum wage, tax incentives and legal uncertainty.

He said that the minimum wage in Indonesia was relatively higher compared to the wage in China and that was one factor discouraging Japanese investors from returning to the country.

"The current minimum wage in Indonesia is higher compared with China's," he said.

Earlier reports have said that some Korean manufacturers had relocated their operations to other countries partly due to the high wage here.

Japanese investors have long called for the introduction of a tax holiday, a policy that is also applied in China and other ASEAN countries to woe foreign investments.

China, for instance, offers tax holidays to foreign investors during the first two years of their operations.

China, along with its territory Hong Kong, last year attracted 80 percent of the foreign direct investment (FDI) in the Asian region outside of Japan.

Japan's Bank of International Cooperation survey showed that Indonesia had continued to fall further behind China and Thailand in the competition for Japanese investment.

Legal uncertainty has also been a major factor creating confusion among foreign companies in doing business here. One prominent case is the recent court ruling that said the local unit of Canadian life insurance giant Manulife Financial Corp. was bankrupt. The controversial ruling was then overturned following pressure from the government.