Red tape hurts investment image

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.