Jetro vows support for Indonesia's revitalization efforts
Jetro vows support for Indonesia's revitalization efforts
The Japan External Trade Organization (Jetro) signed on Monday
a memorandum of understanding with the Indonesian Chamber of
Commerce and Industry (Kadin) on the expansion of cooperation in
trade and investment. In a joint interview with Kompas and The
Jakarta Post's Zakki P. Hakim, Jetro chairman and CEO Osamu
Watanabe talked about the organization's future plans in the
country and Japan's perceptions of Indonesia. The following is an
excerpt of the interview.
Question: How do you see Indonesia's current ability to
attract fresh investment?
Answer: Jetro is discussing and proposing a study suggesting
that Indonesia focus on four major issues. First, the country
needs to develop its infrastructure to support investment in the
manufacturing sectors. Second is the labor issue, where wages are
increasing faster than workforce productivity. Third, the need to
curb corruption. And fourth, revitalizing industrial
competitiveness.
These four issues need to be addressed to attract investment.
Has the new government done enough to improve the investment
climate?
The Infrastructure Summit (in January) was a good step.
Foreign investors are now looking. If you announce improvements,
foreign investment, including from Japan's private sector, will
come.
Second, the need for a new investment law, which was first
proposed several years ago. But the former government did not
address the issue seriously.
Then, we have corruption, which is notorious here. Indonesia
has to solve this problem.
What is the possible role of Japan and Jetro in speeding up
Indonesia's revival?
Indonesia has capital-intensive industries such as the
automotive industry, labor-intensive industries such as the
textile industry, and resource-based industries like the palm oil
industry, but you lack the supporting industries.
Supporting industries are then very important.
Jetro has worked in this field for a long time. We have
brought supporting industries to Thailand, small and medium-sized
enterprises to support industries in Malaysia.
We have the so-called "Supporting Industry Promotion
Planning", which we will use to examine the present supporting
industries in Indonesia. This examination will begin in spring
and be finished in October.
In October, we will work with the Ministry of Industry to hold
an exhibition where Japanese carmakers will come and display the
parts and materials they need.
During the event, domestic supporting industries will be able
to discuss and show the carmakers which parts they can produce
locally. Hopefully, they will end up getting business contracts.
We also want to improve the technical levels of local
supporting industries. We will have local engineers trained in
Japan. We have done this in Thailand and Malaysia. We have the
know-how and experience to allow us to support Indonesia's
supporting industries.
Indonesia has been assembling cars for the past 30 years, but
the country is still unable to build its own automobile. Is there
something wrong with the process of transferring technology?
Automobile manufacturing requires many parts, up to 30,000
parts. It is very difficult to produce these parts. Manufacturers
purchase those parts and assemble them into a car.
In Thailand and China, they do not produce parts by
themselves. They import the main parts from Japan and the rest
are produced locally in joint companies.
Later on, local parts makers, for example in China, produce
and supply components for the cars, but essential elements are
still imported.
Indonesia does not have such assemblers while parts made here
are also low in quantity. Therefore, we will bring out small and
medium enterprises in your country to become supporting
industries in producing parts.
China has been able to improve its exports from basic
manufacturing products to higher quality goods. Why has this not
happened in Indonesia?
The two countries are different.
Indonesia used to be rich in natural resources such as oil and
gas, and foreign investors came to invest in that sector. But
after the 1997 financial crisis, your economy stagnated.
The reform movement following Soeharto's downfall has made the
economy and investment climate even worse.
As for China, after its 1992 economic reform it has prepared
conditions to receive investment from overseas, such as preparing
low labor costs, tax exemptions, tax incentives for investors and
many types of government support, which resulted in foreign
direct investment significantly increasing in the mid-1990s.
After the crisis, China's economy was not good either. But
entering the new millennium, its economy improved and the country
joined the World Trade Organization.
Indonesia, after seven years of stagnation, is returning and
enjoys more than 4 percent GDP growth, although this has greatly
depended on consumption. Considering your high level of
unemployment, you need much higher economic growth, which will
require more investment.
Indonesia and Japan had a joint study group assess possible
free trade agreement negotiations. Do you think the study will be
followed by actual talks?
I can't tell immediately, but ministers from both countries
are discussing the issue. However, Japan already has ongoing FTA
negotiations with the Philippines, Malaysia and Thailand and we
will soon have agreements. Under such circumstances, I believe
Indonesia will also enter negotiations.
Why would Japan want an FTA with Indonesia, because trade-wise
it would benefit Indonesia more than Japan?
Both sides (will benefit). If you reduce your import tariffs,
it will be good for Japanese exports. If Indonesia, under an
Economic Partnership Agreement, deals with the issues of
intellectual property rights and the harmonization of industrial
standards, more Japanese investors will come.
Will increased liberalization include agricultural products?
I hope so.
The Japanese population is falling and it is hard to find new
farmers.
Given this, it is difficult to maintain our self-production
ratio. This is my personal opinion.
In the future, we have to liberalize some of the (farm)
products or we have to cooperate with countries like Indonesia,
where we can use our technology on Indonesian farms. Otherwise,
we will have to consider importing farmers.