RI's bureaucracy the worst in ASEAN: Survey

RI's bureaucracy the worst in ASEAN: Survey

JAKARTA (JP): Bureaucracy remains the top headache for
Japanese manufacturers operating in Indonesia, while other ASEAN
countries have apparently managed to reduce red tape, according
to a survey.

The survey conducted by the Overseas Research Department of
Japan External Trade Organization between December 1995 and
January 1996 found that more than 50 percent of the surveyed
Japanese manufacturers operating in Indonesia cited complexity of
administrative procedures as the worst problem, while others
cited, in order, exchange rate fluctuations, tariffs and custom
procedures, taxes and increases in salaries.

The organization's Jakarta president, Masanori Osumi, told
reporters here yesterday that the most common business-related
problem for Japanese firms operating within the Association of
Southeast Asian Nations (ASEAN) countries is labor-related cases
(64.1 percent), followed by salary increases (62.9 percent) and
unstable exchange rates (48.4 percent).

Complexity of administrative procedures did not appear on the
list of the top five problems faced by Japanese firms operating
in other ASEAN countries, he said.

According to Osumi, questionnaires were sent to 2,262 medium
to large-scale manufacturing companies, either wholly or partly
owned by Japanese investors operating in five ASEAN countries --
Indonesia, Malaysia, the Philippines, Singapore and Thailand. Out
of the surveyed companies, 373 were based in Indonesia. Only 977
companies responded, including 203 based in Indonesia.

The Indonesia-based Japanese companies that responded were
engaged in sectors like textiles and textile products (19.7
percent), chemical and pharmaceutical products (14.8 percent),
metal products (8.9 percent), electronic and electrical equipment
(14.8 percent), transportation equipment (7.9 percent) and others
(38.4 percent).

Of the companies, 40 percent were engaged in final assembly,
35.1 percent in parts or component manufacturing and 36.8 percent
in material processing.

The survey also found that Indonesia leads in the number of
companies commencing operation after 1990 in the five ASEAN
countries, with 31.7 percent of the total companies.

Approximately 70 percent of Japanese manufacturers in the five
ASEAN countries have enjoyed profitable operations.

Besides the five countries, ASEAN also includes Brunei and
Vietnam.

The report said that 66.8 percent of the surveyed companies
operating in Indonesian made profits, as compared to 79.2 percent
of those operating in Singapore and 48 percent of those in the
Philippines. Japanese firms operating in Malaysia and Thailand
made slightly better profits than those in Indonesia.

The most common reasons for the companies' relocation to
Indonesia was low-cost labor (61.4 percent), followed by local
market potential (60.4 percent).

The companies citing potential on the local market as their
main reason for setting up operation in Indonesia mostly started
operation in the 1970s and the first half of the 1980s, while the
companies citing low-cost labor as the reason largely commenced
operation after 1990.

Only a small percentage of the companies which started
operation in the first half of the 1980s pointed to political and
social stability as a reason for selecting Indonesia, whereas
nearly half of the companies which started after 1985 mentioned
it as a reason.

The survey also revealed that 54.3 percent of the companies in
Indonesia plan to restructure their production systems, by
relocating their present production bases to a third country
(21.4 percent), transferring their production base from Japan or
a third country to Indonesia (23.5 percent), diversifying product
lines of a present production base (71.4 percent), and
strengthening resource and development of the present production
base (10.2 percent).

Singapore leads the proportion of companies planning to move
to a third country with 52.7 percent, compared to Malaysia's 37.3
percent, Thailand's 21.3 percent and the Philippines' 28.9
percent.

Regarding the plan of transferring their production bases from
Japan or a third country to Indonesia, the companies cited the
favorable investment condition as their main reason (61.1
percent). (jsk)