Japan's business interests

The visit here last week of the leaders of Japan's most powerful business lobby, the Japan Federation of Economic Organizations (Keidanren), though part of an ASEAN tour, is nevertheless quite significant, seen from the perspective of bilateral economic ties, notably Japanese investor interests in Indonesia.

The fact that the most powerful business leaders from the world's second largest economy still bothered to visit Indonesia and held meaningful, straight-forward talks with the President, Vice President and local business organizations would ease the great concern that Japanese investors might completely write off Indonesia from their business plans.

Such concerns were prompted by the disclosure here in late March of a very negative assessment of the Indonesian business climate by Japanese business executives, as surveyed by the Japan Bank for International Cooperation.

Certainly, Japan has been and is still the largest foreign investor in the country and the largest provider of official loans. But Indonesia cannot take Japan's role for granted. The keener competition posed by other Southeast Asian countries which offer a much better investment climate to foreign investors, combined with the worsening domestic infrastructure, legal framework and industrial relations in Indonesia, could puncture that privileged relationship.

Hence, lies the importance of the Keindanren leaders' visit that enabled the business leaders to gather first-hand information about the overall condition and assess the future outlook of their role in the country amid Indonesia's rapidly expanding economic ties with China, the new emerging economic power in Asia.

After all, Japan cannot simply ignore Indonesia. Seen from their own long-term interests and their future economic role in Asia, Japanese investors cannot afford to abandon Indonesia, despite its myriad problems now.

It is not only Japanese businesses that have suffered the brunt of Indonesia's economic crisis and the complications caused by the country's transition from an authoritarian to democratic rule and from a centralized, authoritarian government to regional autonomy.

Moreover, the thorniest issues within bilateral economic ties have been resolved by the recent agreement on the restructuring of Chandra Asri's huge debts to a Marubeni-led creditor consortium and the recent decision to resume the construction of five giant industrial and power projects worth more than US$2.6 billion involving major Japanese investors and creditors.

China's entry into the World Trade Organization early this year and the ASEAN plan to extend its free trade area to China within 10 years and subsequently to South Korea and Australia make it even more imperative for Japanese investors not only to maintain but even to expand their operations in Indonesia, as the largest ASEAN country.

This is, we believe, the grand vision very much in the minds of the visiting Keidanren leaders.