Red tape hurts investment image

By Donna Woodward

MEDAN, North Sumatra (JP): This immigration horror story illustrates the bureaucratic tangle that threatens Indonesia's investment image. Reports have surfaced of the deportation in May of a British investor, David Eddy. He visited Bengkulu in the 1990's and found it appealing and full of promise.

He submitted a proposal to the Investment Coordinating Board (BKPM) to form a joint venture company to develop a medium-scale building project in Bengkulu, a two-story building block of 100 low-rent residential units. BKPM approved the plan and Eddy obtained his residence, work, and building permits, all issued uneventfully in 1995. The investment capital is already fully paid.

The units are rented to local students and young workers. As a community member, Eddy has invited clerics to speak to the residents about spiritual and moral matters, other community professionals to give talks on health matters, and the police to speak on dangers of narcotics.

Eddy's spare-time interest has been the Friends of Bengkulu, a group of volunteers whose purpose is to help preserve historical sites around Bengkulu. He arranges for planting of shrubbery in the cemetery holding the remains of British subjects, the regular cleaning of graves, and other activities to preserve two local historic Forts. These activities have been conducted openly and with the knowledge and approval (albeit unwritten) of the local government.

According to the deportation order Eddy's immigration sins are two. One is that his activities as a member of Friends of Bengkulu which violated the scope of his authorized activities as finance director of his company (of which he is majority investor). The other relates to the company itself.

With tortuous logic the immigration office explained that although the BKPM approved the project, one within the public works sector, the original building permit described the project as a boarding house (pondokan) which, according the Ministry of Trade and Industry regulations, is within the retail trade sector and therefore closed to foreign investment.

In August 2000 after a local newspaper reported that Eddy's company was holding the wrong type of building permit, the company obtained a corrected permit for apartments. But now the Immigration authorities say the Bengkulu local government has no regulations for apartments.

It took the bureaucracy from 1995 until 2001 to find these "errors." When they did, they gave the investor just two days to pack his things and leave. Despite the BKPM approval of investment funds, the foreign investor has been separated from his home, his life, and his investment, which is in the range of Rp 2 billion-plus.

Along with security problems and normal corruption, do investors now need to worry that bureaucratic errors will threaten the status of their companies and the legitimacy of their work permits? If there are errors, is there no way to resolve them short of a deportation order accompanied by an order to blacklist Eddy for one year?

Eddy believes his real transgression was refusing to make an unofficial payment of US$1200 to the assistant head of Bengkulu Immigration in 1998. Since then he has been accused of a variety of petty offenses that he categorically denies, none of which was considered sufficiently valid to be included in the deportation order.

Another issue that should concern temporary residence (KITAS) holders is that of volunteer or extracurricular activities, which might mean anything from serving on an executive board to raising funds for orphanages to writing articles like this. Some institutions (e.g. schools) welcome expatriate volunteers because it enhances their status to have foreigners on staff.

They employ Indonesians but cannot afford to employ foreigners. Unwittingly or not, by accommodating these institutions expats are either taking a position from Indonesian professionals who cannot afford to work for nothing, or helping the institution avoid immigration and the manpower ministry rules for employing foreign workers and the fees and taxes that would accrue to the government. They violate Indonesian immigration laws.

Other organizations, foundations that work with the homeless and the sick, children's protection groups, etc., depend on volunteers to achieve their purposes; they and their volunteers fill a critical void in community services. Were it not for volunteers, both local and foreign, the organizations would not survive.

Does Indonesia really want to prohibit foreign residents from participating in all volunteer activities?

Justice minister Baharuddin Lopa should not need to involve himself in individual cases like this. But he has promised to get tough with immigration corruption. If he does not, this sends a signal to regional officials that they are free to extort, intimidate, and finally deport investors whose primary offense might be resisting corruption.

This particular case involves not the usual overstayer or an alleged criminal but a bona fide investor who has become entangled in Indonesia's byzantine bureaucracy. It highlights the apparently unlimited discretion of immigration officials to invoke a narrow interpretation of a work permit to target a particular person.

On the heels of the case of the Manulife insurance firm, this case sends another alarming message to resident foreign investors. Please, Minister Lopa, review this capricious deportation quickly. Rectify the wrongs.

The writer, an attorney and former American diplomat at the U.S. Consulate General in Medan, is a management consultant.