Keidanren urges RI to improve investment climate

Berni K. Moestafa, The Jakarta Post, Jakarta

Indonesia's largest investor, Japan, renewed calls for the government to improve the investment climate, reiterating that fears of a lack of security, unruly labors and legal uncertainties were preventing the yen from coming here.

Japan's Federation of Economic Corporations (Keidanren) pulled back under the spotlight of Indonesia's poor investment climate during its two-day visit to Jakarta last week, according to a Japanese government official.

"The key message (of Keidanren) was the investment climate," First Secretary for trade at the Japanese Embassy Tetsu Fukuoka told The Jakarta Post on Monday.

Keidanren is Japan's most powerful business lobby -- in a country that is the largest source of private investment and official loans to Indonesia.

Led by its chairman Takashi Imai, Keidanren met, among others, President Megawati Soekarnoputri and the Indonesian Chamber of Commerce and Industry (Kadin), Fukuoka said.

He said that Keidanren told Indonesia to do more to attract foreign investment.

This hammers home old concerns that Indonesia is losing slices of the world's capital flows to neighboring countries.

A 2001 survey by the Japan Bank for International Cooperation showed that the unfavorable investment climate had cost Indonesia its status as Japan's number three investment destination.

Die-hard problems include Indonesia's corruption-prone courts, high security risks, and an increasingly unruly labor movement.

Yet calls to overcome the maladies have subdued, or have been drowned out by apparent progress in these areas.

The government was hailed for prosecuting several high-profile graft cases. But critics question whether the moves signaled a functioning judicial system or a new venue for politicking.

Labor disputes that shocked foreign investors last year are absent, but have given way instead to mass antiprivatization protests.

On the security front, no fresh news of armed groups terrorizing foreign companies' operations reduced fears of Indonesia's separatism movements, but not their risks.

Overlying all of this is the International Monetary Fund's positive stance on Indonesia, which has enticed foreign investment funds to move their capital back into the country.

But news of foreign direct investment, which is a better indicator of investor confidence, remains scarce.

Fukuoka said Indonesia, and other countries in the region, must compete with China's growing attractiveness to foreigners.

Analysts also said China's influence within Indonesia had grown, as more of its products competed hard against Japanese ones.

In this light, the Keidanren visit to Jakarta may signal that another wind is blowing in favor of Indonesia.

Businessman Sofjan Wanandi said Japanese investors were increasingly worried over losing their long-established market share here to Chinese competitors.

He said most Japanese investors in Indonesia were in the manufacturing sector, at which the Chinese were getting more competitive.

"They (the Japanese) are starting to pay more attention to us," Sofjan, who attended Kadin's meeting with Keidanren, said.

This may be a precursor to further investments here, but Sofjan said that would come only on the back of an improved investment climate.