Relocation of foreign firms hurts RI

Relocation of foreign firms hurts RI

The Jakarta Post, Jakarta

Plans by a large number of foreign companies here to relocate
their operations to other countries is an apparent reaction to
their frustration over the slow progress by the government to
improve the country's business climate.

"When the government declared this year "Investment Year
2003", hopes were high on the part of investors that the
government would get more serious and take significant steps to
improve the climate here.

"If the relocation plans materialize, then it will all be a
total failure," Sri Adiningsih, University of Gadjah Mada
economist and is a member of an Indonesia-Japan working group set
up to bolster economic corporation between the two nations, told
The Jakarta Post on Thursday.

Japan-based investors represent the largest percentage of
foreign investors in Indonesia.

Sri was commenting on earlier remarks made by Investment
Coordinating Board (BKPM) official, warning that there would be
more than a hundred foreign companies relocating their businesses
by the end of the year, 40 percent of them Japanese, citing a
poor business environment in terms of security and the legal
system, among other issues.

Johnny W Situmorang, a BKPM director, made the announcement
but did not publicly state which sectors those companies were in
or what the size of their investment was.

Attempts to seek further confirmation from the BKPM office and
Japanese business associations were unsuccessful.

Sri said that she had not heard of the planned exodus, but
admitted there were continuous complaints from investors,
Japanese and others, over the absence of a clear-cut and
integrated concept on the part of the government to eliminate
problems detrimental to investment.

"They (investors) think that currently the business climate
here is worrying.

"As this is supposedly 'Investment Year 2003', the government
should have been able to focus and solve many of the chronic
problems such as the legal system, security, taxation,
infrastructure, thuggery, illegal fees etc., but the progress
seems to be too slow," she said.

If the exodus does happen, Sri added, it would be a serious
blow to the economy because it would mean that Indonesia would
not only lose the potential income, but would also bear the brunt
of thousands more unemployed local people.

"Japanese investors, for instance, their businesses are
usually in manufacturing: electronics, automobiles and other
industries that employ many workers. We cannot afford to lose
their business."

The government's investment promotion campaign this year was
seen as a desperate bid to boost investment, but it has not been
successful so far due largely to a lack of coordination.

As of July, BKPM reported US$4.7 billion in approvals for
foreign direct investment (FDI), with around 40 percent of that
coming from Japan.

It was actually a rise from $3.2 billion posted at the same
period last year, but most of that figure is a reflection of
several local companies changing their status to foreign ones.

In fact, investment approval numbers have been descending on a
steep slope in the last 5 years. In 2002, FDI approvals plunged
by 35 percent, while domestic investment approvals dropped by 57
percent.