P&G leaving RI, experts lament govt inaction
Rendi A. Witular, The Jakarta Post, Jakarta
U.S. consumer goods giant Procter & Gamble plans to close down in July its only remaining factory leaving hundreds unemployed as part of a restructuring program of the group's operation in Southeast Asia, president PT Procter and Gamble Indonesia (P&GI) Raul T. Falcon said.
However, industry leaders said this was further disturbing evidence that the country was losing out against its neighbors in attracting foreign investment due to the continued unfavorable business climate here.
Falcon told The Jakarta Post on Monday that about 230 employees of the plant, mostly technicians and managers, would have to be laid off.
He declined to provide details about their severance packages.
The Jakarta Stock Exchange-listed P&GI currently operates a plant in Bekasi, West Java, producing healthcare products under the brand name of Vicks.
Falcon said that after the facility was closed down, the company would outsource the production of the Vicks health care products to local company Darya Varia Group to cater to local demand.
He, however, could not provide details on the future role of P&GI. P&G also has a distribution company called PT Procter and Gamble Home Products Indonesia, the fate of which is still unclear.
The company shut down its haircare products manufacturing plant in 2000, and relocated to Thailand, which has become the group's hub for the Southeast Asian region.
"We plan to consolidate our plants so that we can provide centralized manufacturing facilities for the region. This is part of our restructuring program until 2005 in a bid to make our operation more efficient and competitive," said Falcon.
He played down suggestions that the relocation of the plant was caused by the worsening investment climate in Indonesia.
He explained that P&G's decision to make Thailand its hub for haircare products and the Philippines for its healthcare side was because supporting companies for raw materials had already been established in those countries.
But experts said that P&G made the move to take advantage of the Asean Free Trade Area (AFTA), which has slashed import tariffs among the Southeast Asian members to between zero and 5 percent to boost trade. This means that exporting products from Thailand to other countries in the region would be relatively free of import tariffs.
The selection of Thailand as P&G's hub in the region clearly indicated that the investment climate and economic infrastructure are much more attractive compared to Indonesia.
Last year, Japan's Sony Corp. relocated its audio equipment manufacturing plant from Indonesia to neighboring Malaysia.
Chairman of the National Economic Recovery Committee (KPEN) Sofjan Wanandi said P&G's decision was another harsh blow for the Indonesian economy.
He said that the hard-earned stability in some macroeconomic indicators failed to encourage new investment.
Sofjan criticized the government for being too slow in resolving the persistent problems encountered by investors including illegal fee demands, poor implementation of the autonomy law, security problems and the absence of a credible legal system.
"Investors are now tired of it all, they tend to just pull out from the country. As you see, all of their complaints have remained unresolved for a long period of time due to the lack of integrity and commitment among government officials," said Sofjan.