U.S. investors to keep close eye on RI polls
By Yenni Djahidin
WASHINGTON (JP): Among foreign groups and individuals planning to monitor Indonesia's first multiparty elections in June are American business leaders with interests in Indonesia.
They will not be observing the polls in the way the Carter Center did in Nigeria and probably will in Indonesia. But they will be watching it closely because, like many others, they feel that this will be a crucial turning point for Indonesia to resolve the current political and economic crisis.
The president of the U.S.-ASEAN Business Council, Ernest Z. Bower, says most American investors are delaying investing in Indonesia until after the elections.
But none of the council members is pulling out, he said in an interview at his office here. "They're trying to survive the transition."
The council is a nonprofit organization grouping American companies who have investments in the Association of Southeast Asian Nations (ASEAN) countries.
Bower visited Indonesia recently with 20 other members of the council. He talked about his trip in the following interview.
How was your trip to Indonesia?
It was good. I think you get more pessimistic about Indonesia if you do not go there. Visiting makes you feel that Indonesia is in a better situation than what you'd learn by just reading newspapers here.
Everybody, from cab drivers to government officials, have hopes for their country. This is an historic turning point, so there is a lot of anxiety. I am pretty optimistic about Indonesia's future. More optimistic after my visit.
How do you assess the short-term prospects?
Politics are what's on people's minds and that's understandable given the historic changes coming face to face in Indonesia. But I found that when you start talking to businesspeople, there are real economic issues being dealt with right now. The economy is not completely dead, and it's probably bottoming out right now. From our perspective, the key for foreign investors is to stay engaged, support good people, good employees, good partners, try to keep them alive through this process and look for opportunities when things pick up again, which I think will probably happen after the elections.
What is the most serious problem you see in Indonesia?
In a way the problem is the solution, because the problem right now is the uncertainty caused by the political situation. The good news is that there are going to be elections and that, once they take place, then Indonesia takes a step forward and starts to move through its own process of reforming its government and, hopefully, that will create an environment conducive to entrepreneurs and the development of Indonesian business in the future. That's the hope that American business has.
One analogy that I use is there are three crises happening all at once in Indonesia: financial, economic and political. It's like a forest fire, a lot of things are kind of burning, and that's sometimes great because new trees come up. What we are trying to do is figure out what has been burned out and what has been damaged. Because what we can do is observe this, and see which will be a strong tree in the next forest in Indonesia. There are some good people there who hopefully will be able to be involved in politics and good business partners.
Have you seen those trees, and what are the best business activities?
I think certainly agribusiness is strong. It's going to be strong after coming out of this. Rural areas seem better off than people would have imagined six months ago. Agricultural prices worldwide are fairly strong and there are some outstanding Indonesian commodities and agricultural companies that will be good partners. I point, for example, to the investment of one of our major food companies, Heinz. It just bought into an Indonesian ketchup company, ABC Indofood. They bought their spicy ketchup division. It's an investment of between US$50 million to $100 million.
American companies will understand the political risks in Indonesia better probably post-June. You are going to see an increase in direct foreign investment, except if the elections don't take place, or if after the elections there is more chaos and violence, in which case people will hold back.
What is your assessment of the upcoming elections?
From a business standpoint, it's important that they take place and that the process is open enough so that Indonesians get the person they want elected, that there is a government which they can support. That's the key thing. For business, political stability is the key. To have political stability, you have to have legitimate elections. If you have elections which are seen as illegitimate, you're going to have continuing strife.
What is the prospect for American business in Indonesia?
We (just) came away from this mission. We had 14 companies and probably 20 people, including executives. Mostly companies which have some involvement in Indonesia already and which are looking for future investment, or who came along just to try to understand the environment there. And we wanted to indicate that we weren't going anywhere. We are part of the transition in Indonesia because our companies have investments on the ground there and employ people. You can't afford to stand back and say, "Let's let Indonesia go through this transition and then we'll go back in." The point for my council and for my members is we are there, so we have to be intimately informed about what is happening in this process because it will effect our business and our members don't plan to pull out of Indonesia. They're trying to survive the transition.
And if the elections go well?
You'll see some new investments this year because there are people sizing up Indonesian companies and partnerships, distribution channels they'd like to be part of. For American companies, we think we have a lot to offer at this time in terms of bringing in partnerships. We've got money, we've got technology and we have international distribution channels which Indonesian companies are going to need to start to emerge from the crisis.
If the elections go well, you'll see the well-informed companies that have good intelligence on Indonesia, who understand that the elections went fairly well, and that the country is going to be moving forward and they'll start to make investments. But if they don't see political stability, I think that will stall new investment. I don't think you'll see a large pullout. But Indonesia is in a very, very competitive neighborhood. People are watching Thailand, Malaysia, the Philippines and China. It's an extremely competitive position that Indonesia is in for foreign direct investment. There are a lot of reasons to go there, but until political stability comes, you won't see new flows of investment. I think you'll see the graph starting to go up this year. It will get better after the presidential election.
What kind of leader do you want to run Indonesia?
There is a real honest answer to that. We want a leader who the people will support. If it's somebody who the people of Indonesia won't support, there's not going to be political stability and that's bad for business.
We met with most of the front-runners (B.J. Habibie, Amien Rais, Megawati Soekarnoputri, Gus Dur, Adi Sasono) and asked what their plans were and what their vision was for Indonesia. We need to know, if they win, what it would be. There was a common denominator that is important for us: all of them said there was a role for foreign investors.
Was there any particular candidate you like the most?
American business is not foolish enough to take preference over one candidate. Maybe individual people have somebody in their hearts, but it's really not our elections, not our country.
But it will effect your business.
Right. Everyone we've talked to has supported the sanctity of contracts that were signed under the previous regime. That's important for Indonesia's international profile going forward. If you were seen by foreign investors as breaking contracts, then you really would go backward in terms of being able to attract new investments. So, across the board we heard fairly positive things. No one gave us reason to fear them, nor did a particular person stand out that we would pick as our favorite.