P&G leaving RI, experts lament govt inaction

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.