No grounds for complacency

No grounds for complacency

The recent statement from a senior Japanese banker about the
attractiveness of Indonesia for foreign investors is yet another
confirmation of the relatively better investment climate here as
compared to other Asian "green pastures" such as China and
Vietnam.

Norimitsu Inaba of the Asian Development Bank therefore
recommends that Japanese companies invest in Indonesia. Business
conditions in Indonesia, Inaba told a seminar in Tokyo earlier
this week, are still much better than in those two other
countries.

A similar sentiment was expressed by Taiwanese businessmen who
visited Indonesia a few months ago.

Market mechanisms and infrastructure, the number of existing
private companies, the legal aspect of business activities and
the economic management of this country are some of the factors
cited by Inaba as the competitive advantages which are better
provided by Indonesia. The Taiwanese businessmen added the
relatively low-cost labor and abundance of natural resources as
Indonesia's stronger points compared to other countries in Asia.

More recently, the Australian Minister for Trade, Senator Bob
McMullan, even went as far as to say that the recent media ban in
Indonesia will not dissuade Australian business people from
investing in Indonesia. He was here to lead a business delegation
to the "Australia Today Indonesia 1994" trade and cultural
promotion.

Those foreign views, however, are in contrast to the growing
domestic concern about the latest trend in investments in
Indonesia. No less a person than Coordinating Minister for
Political Affairs and Security Soesilo Soedarman earlier this
year warned of Indonesia's declining ability to attract foreign
investments.

Such concern is not groundless. Statistics show that the value
of foreign direct investments in Indonesia in 1993 substantially
decreased to US$ 8.14 billion last year from $ 10.32 billion a
year earlier.

The first five months of this year showed a marked increase in
new investment commitments, reaching a total value of $ 5.1
billion compared to $ 4.1 billion in the corresponding period of
1993. And the government is optimistic that foreign investment
commitments this year will exceed $ 10 billion.

However, Minister for Investment Development Sanyoto
Sastrowardoyo immediately added a note of caution when he
announced the latest figures last week. Not all of the investment
commitments have been implemented despite government
encouragement. Of the domestic investment commitments, only 73.8
percent have been implemented. In the foreign investment arena,
only 51.3 percent of the $74.9 billion committed since 1967 have
been realized.

It is hard to disagree with the foreign opinions mentioned
above. Indonesia, in fact, still has some advantages in terms of
foreign investment climate as compared to newly opening "green
pastures" like China, Vietnam, or even India.

On the other hand, in recent years the speed of change in
those countries in terms of foreign investments seems to be
greater. And the gap is narrowing when we talk about comparative
advantages between Indonesia and those other Asian countries.

On top of that it should be pointed out that within the
current five-year development plan Indonesia needs about $ 222
billion investments from the private sector, both foreign and
domestic, to be able to maintain a required GDP growth of more
than five percent a year and to accommodate the estimated 2.5
million new entrants a year to the labor market. A 10-billion-
dollar influx a year would still leave a very big hole to cover.