Think ahead: Indonesia can gain without pain

John A. Prasetio and David Parsons, Jakarta

Amid his crisis talks last week, President Susilo Bambang Yudhoyono addressed over 700 representatives of Indonesia's foreign investment community. This large, influential group had been called together by their foreign chambers, and they were listening very carefully.

However, this important event with not less than 50 reporters passed with only limited coverage because the media and the nation were focused on the current national emergency -- the plunging rupiah.

Perhaps the media thought that the meeting entitled "Making it Happen: Building a Better Investment Climate for the Development of Indonesia" was unimportant because it was not held as part of the crisis talks. There was no appeal for calm, no air of emergency or buzz about Bank Indonesia's capacity to save the day.

They were right, in some respects. There was a sense of urgency but not emergency. Economic stability was at the heart of discussions but not the role of Bank Indonesia. The President and the participants understood very clearly the importance of the gathering and decided it should happen on a regular basis.

What were they doing? The foreign investors were attentive to the resolve of the President to take action now on many seemingly small issues that together would boost Indonesia's investment climate and give Indonesia a more stable future. Their collective interest is in defining and solving problems before they become emergencies. Everybody, including the President, knows that if these issues are not addressed, Indonesia will have a bigger problem in the future than the one that surfaced last week.

Amid the panic selling of rupiah assets over the last two weeks, soul-searching questions from foreign investors came to light.

Despite the able leadership of the President, why is the pace of reform so frustratingly slow? Yes, there was a timid investment recovery in the first few months of the year, but, for greenfield investment, no big capital inflow has yet come. There is now a clear realization that it will never come unless the structural weaknesses in the economy are addressed through decisive policy reforms. Without investment we will limp from one crisis to another, we cannot offer jobs or growth and we cannot stabilize the value of the rupiah over the long term.

In the context of the tough week Indonesia has just been through, the contrast between crisis meetings on oil and the rupiah and the meeting the President had with foreign investors is worthy of note. It reveals our attitudes to the challenge of securing our future and how we operate in government and business.

Too often Indonesia moves in and out of the crisis zone. In reality, the only emergencies that Indonesia should now be managing are natural disasters. Indonesia, having gained political stability and the election of a strong leader, should be thinking ahead and taking decisions for long-term economic stability and sustainability.

Indonesia should be building a strong climate for investment to lay down the foundations for 21st century infrastructure, new factories and equipment and new services. Only this will give them their jobs and prosperity.

Indonesians should no longer feel that gross or even petty corruption is the way to get the engines of the government moving, to achieve justice or to supplement their incomes. Foreign business visitors should not be hassled at the airport, the legitimate overpayment of taxes should be refunded without delay, and the legal framework for private sector participation in infrastructure projects should be made more transparent and simple.

The days of burdening our children with debt to sustain our present lifestyle and burning fuel excessively should be over.

While many of us are still hurting from the 1990s crisis, we should no longer be nursing our wounds and blaming others. All the specialists advise that we start a good health regime. Indonesia can work with foreigners and compete with them if it sets the rules of the game and abides by them.

What are the interests of foreign investors in Indonesia? They are no different from domestic investors. They see the potentials of Indonesian people and Indonesia's vast resources. They seek a stable economic and political environment. They survive and grow by making profits. They overwhelmingly want to make long term commitments in the country -- not take and run.

Like most developing countries, Indonesia does not have enough domestic savings or the expertise to develop alone. Foreign investors are, therefore, a means to lighten our debt load by bringing in significant sums of money, the latest technology and new ideas for doing business.

They create jobs, opportunities in supporting industries, a healthy flow of new tax revenues and much-needed export revenue. They can reduce our foreign exchange needs by producing goods and services domestically that Indonesia would otherwise have to import. They can even help us explore for more oil and build refineries.

But Indonesia must realize that we are in a very competitive world. Foreign investors have many choices in many other countries including in our immediate neighborhood. Even our domestic investors look at these choices.

Foreign investors are not asking for any more than any citizen or any domestic investor should have. They are not asking for anything more than they can get in successful neighboring economies.

Of course, a stable macroeconomic climate including a stable rupiah is crucial. But on the ground, when starting their operations and in their day-to-day operations their interests are very basic. They seek timely government decisions and implementation without corruption and endless red tape, legal certainty with due process and without favor and a fair and transparent tax system. They want labor laws under which good workers can be hired and rewarded rather than laws that treat good and bad workers in the same way.

Right now, our rules of the game do not measure up. They neither serve our interests nor safeguard the foreign investors'. They are not implemented efficiently and transparently.

The present problems with oil and the rupiah will require hard decisions and quite a lot of pain before they are solved because we kept putting off these "hard" decisions. This provides ample evidence as to why the President should reenergize his economic team to be more focused on executing the reform agenda to regain the confidence of private investors and to open the way for the return of the Indonesian money now parked overseas.

We have a chance to move now on building the right investment climate to secure our development without the need for hard decisions, without pain and without an emergency. The President knows this. He deserves the support of the whole country.

John A. Prasetio is Vice President of Kadin Indonesia and Head of its International Cooperation Department. David Parsons is Senior Advisor to Kadin Indonesia.