Taiwan investing big in Indonesia

Taiwan investing big in Indonesia

Urip Hudiono, The Jakarta Post, Jakarta

Putting all political differences aside, Taiwan -- like China --
is one of Indonesia's important economic partners.

According to data from the Taiwan Economic and Trade Office
(TETO) in Jakarta, two-way trade between Indonesia and Taiwan
performed impressively last year, amounting to nearly US$6
billion in value, representing strong growth of almost 35 percent
from 2003. More good news for Indonesia is that last year's trade
balance was also in favor of Indonesia.

Taiwan's exports to Indonesia include boiler machinery,
mechanical appliances, electrical machinery and equipment, and
man-made fibers, while Indonesia mainly exports oil, gas and
paper products to Taiwan.

In terms of investment, data from the Indonesian Investment
Coordinating Board (BKPM) shows that investments from Taiwan to
Indonesia as of 2004 had reached a total of 1,002 investment
projects worth US$13 billion. Meanwhile, although Indonesian
investments in Taiwan are still small, Indonesia has invested a
total of $600 million in the island territory.

For this year, Taiwan is already planning to increase its
investments in Indonesia, with a $47.5 million mining project
currently being set up in East Kalimantan. A $22 million steel
machinery joint venture project between Taiwanese and Japanese
investors is also under preparation.

"All of this has certainly provided a strong foundation for
further economic relations between Indonesia and Taiwan," TETO
official David Y.L. Lin told The Jakarta Post in a recent
interview. "And my observation is that trade and investments
between Indonesia and Taiwan will continue to grow."

Lin is hoping the Indonesian government will encourage the
establishment of more joint venture investments between Taiwan
and Indonesian enterprises, and that the government would
consider establishing a mutually beneficial free trade agreement
(FTA) with Taiwan.

TETO deputy representative for economic affairs Chang Chun-fu
said there were big opportunities to improve trade between
Indonesia and Taiwan because the economies complemented one
another.

"Indonesia is rich in natural resources and abundant with
human resources, while Taiwan has and can provide the technical
and managerial expertise needed to create added value to those
resources," he said.

Indonesia, Chang said, can also benefit from Taiwanese
investors, due to the fact that most of them are small- and
medium-sized enterprises (SME) running export-oriented
businesses.

"Because of this, Taiwanese investments can actually help
Indonesia increase its exports volumes and revenues for its
foreign currency reserves," he said. "Indonesian SMEs can also
learn much how to improve themselves through cooperation with
investing Taiwanese SMEs."

In terms of reducing unemployment in the country, Taiwanese
investments are estimated to have led to the employment of
between 600,000 and 700,000 Indonesian workers. Taiwan has also
been an important destination for Indonesian migrant workers,
with 100,000 workers estimated to be in the island nation.

Historically, Taiwanese firms had since the 1970s invested
mainly in the textile businesses in Bandung, furniture
manufacturing in Surabaya and Cakung, as well as in the sport
shoes manufacturing business, Chang said. A significant number of
them, however, later left the country, following the May 1998
riots.

"Recently, however, Taiwanese investors have returned to do
business in the agricultural processing industry, steel industry,
and export-import services," he said.

One of Taiwan's largest motorcycle manufacturers, Kymco,
recently set up an assembly plant in Indonesia, bringing in some
15 other investors to provide its spare parts. Companies from
Taiwan's internationally famous information technology (IT)
industry have also set up shop in Indonesia though they have yet
to invest in any production ventures.

Chang however said that the Indonesian government still has a
lot of homework to do in improving the country's investment
climate. Among factors of particular concern to Taiwanese
investors, Chang said, was the corruption and inefficient nature
of the country's ports, where illegal fees have created a high-
cost economy.

As Taiwanese investors were mostly export-oriented, expensive
port facilities would significantly affect their businesses.

"In the past, the profit margins that the companies enjoyed
might have been enough to tolerate such high costs, but nowadays,
with the profit margins getting smaller by the day, such costs
will make the companies uncompetitive, and this means they will
likely move to another country," he said.

"The Indonesian government has said it will address the
problem, but it is its actual implementation that we are waiting
for."