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.