`Korean investors reluctant to enter RI'

`Korean investors reluctant to enter RI'

Evi Mariani, The Jakarta Post, Jakarta

South Korean investors remain reluctant to commit significant
amounts of new money to Indonesia due to lingering problems that
make the investment climate here unfavorable, according to an
expert.

"I think there won't be any new South Korean investment in
Indonesia this year," Lee Seong-Soo, director of the Korea Trade
Center (Kotra) at the Embassy of the Republic of Korea in
Jakarta, told The Jakarta Post on Thursday on the sidelines of a
trade forum.

He said some labor-intensive South Korean companies like
textile and garment makers, shoe producers and toy makers were in
fact considering relocating their operations here to other
countries in the region.

South Korea is the seventh largest foreign investor in
Indonesia. Last year, South Korean investment here amounted to
US$369.8 million, slightly higher than the $369.6 million in
2001.

The flow of foreign direct investments into Indonesia has been
slow over the past several years due to a host of problems,
including lack of security, poor implementation of regional
autonomy, a labor law that is unfriendly to business and poor
infrastructure.

"The investors keep saying to me that the circumstances have
gotten worse, as they see labor movements rising," Lee said.
"Moreover, they see the new labor law, which requires employers
to pay bigger wages, as a big burden."

"They are eying China and Vietnam as new locations," he said,
but quickly added that because relocating factories was difficult
the South Korean companies would not be leaving Indonesia any
time soon.

There are about 230 labor-intensive South Korean companies
operating in Indonesia, employing some 500,000 workers, according
to the latest data from Kotra.

Separately, University of Indonesia economist Bambang
Brodjonegoro said many foreign investors were putting their
investment plans on hold until after the results of next year's
elections.

"They first want to see what the new government will be like,
what the new government's attitude toward foreign investment will
be," Bambang said.

He said that aside from political concerns, investors were
also discouraged by the limited power supply in the crowded Java-
Bali power network.

"Currently, almost every industrial operation has to have
back-up generators, which are quite costly. Nowadays, rotating
blackouts by PLN (the state electricity company) have made
generators even that much more necessary," Bambang said.