Why foreign investment hasn't returned here

Why foreign investment hasn't returned here

W. Scott Thompson, Gianyar, Bali

Back in the late 1960s there was a sleazy American promoter
who whispered in the ears of clients, "do you wish to become
really and truly rich?" Many followed Bernard Cornfield briefly to
riches but not long after to rags.

Yet the wish to become rich is at the heart of whether
people -- and countries -- in fact become rich. Of course, in a
trivial sense, everyone wishes to be rich, and every country says
it too. It's as true as saying everyone wishes to breathe air.
But so what: Are you willing to do something to get rich?

This is at the heart of the question posed in recent The
Jakarta Post essays on Indonesia's development plan and its need
for foreign investment. For there has never been any question
about Indonesia's ability to get rich. It did a remarkable job on
the first leg of the journey during the New Order -- but at great
cost.

Now it has shown political sophistication in elections and
the development of political parties, and still has vast mineral
resources and human talent in reserve. Yet disinvestments
continue and doubts rise.

Recently I gave four lectures to business leaders in India, a
country that has shown overwhelmingly that it wishes to get out
of its poverty and on to the rapid growth charts that will
empower its billion people. In New Delhi I had the chance to talk
at length with a recently-retired civil service head of world
distinction, about economic reform and business investment.

My interlocutor, known to support reform, limited his
enthusiasm only by saying we ask merely that the investors have
an interest in India. Of course he said it with that famous
Indian civil service high tone that makes clear your `interest`
had better be a bloody good one, a commitment to the ideals of
Nehru, Gandhi, and so forth.

The truth is, the great civil servant in Delhi had hardly
asked for much. But if you want to get rich, you can't even ask
that, or so the evidence suggests. Foreign investment -- and thus
the opportunity for job creation at a high technology levels --
comes where investors feel confident.

They feel they are bringing everything to bear that they have
learned, and which has made their home country rich, to the
recipients. If they don't exactly seek free goods, they expect
something serious for the heightened risk they take in investing
in a politically inexperienced country.

Most of all, they can sense whether the country wants, really
and truly wishes, to get rich. Because if the country doesn't,
how will they. The investors, themselves get richer?

Go to China and look at the cranes dominating the landscape.
Any doubt that China intends to get rich, and to have the goods
that goes with it -- educational opportunities, higher medical
standards, cars and color tvs -- dries up on the first view of
any of the growth cities. Investors come in because despite the
communist party's presence and plenty of corruption, they can
sense, even smell, the desire to join them in getting rich.

Thailand got richer faster, between 1985 and 1995, than any
country in history. This was because the government let the
entrepreneurs run their own show, and let investors rush in on
top of each other, building infrastructure along with hospitals,
freeways and automobiles.

Foreigners were made to feel welcome. You now get from
airplane to taxi in minutes -- immigration is almost a fast-
walking line. No triple lines for paying new visitors' taxes,
hour open hour, and it's easy in Thailand to stay a long time. No
greased palms at the customs desk.

True, the Thai made many mistakes, especially at the
ecological-environmental level. But they are now rich enough to
undo the damage. To those who say they have abandoned their
dignity they can reply, "what about the dignity of the starved
child or the uneducated teenagers? Aren't they part of the
nation's dignity? And now that we are rich we have higher
prestige all over the world."

In India the problems are vastly larger, and the recent
elections spell out that the poor two thirds aren't going to let
the vast -- but one third -- middle class keep all the winnings.
Yet you can read it in the papers and smell it in the air.

Investment is going to pour into India and it is going to
sustain 6-9% growth rates for the indefinite future. The demands
of the two thirds who returned the Congress to power, is also
good economic news; if they do not benefit even in the medium
term, then economic growth will ultimately be curtailed, for lack
of a broader local market.

It is true that investment is slow to gather speed and slow to
change habits. The image of past instability dies hard with
businessmen who only skim the headlines. But there must be a
further reason why disinvestments has been so substantial here
since 1998, even now as the political achievements are
spectacular and economic growth respectable.

The clue is in how Indonesia, the great and sprawling
archipelago, presents itself. The investor arrives. He knows
there's been bombs and terrorism, and he is impressed by the
world-class police work that has brought the culprits to heel.

But what kind of country, just when its tourist receipts are
halved or worse, travel advisories and further bomb threats,
makes its visitors line up in new line upon new line to pay a $25
tax to enter -- and then cuts his allowable visit from 60 to 30
days? That is what he is asking.

Those acts in themselves may not be so important. But what
they symbolize is significant. What counter-productive,
nationally self-destructive, acts will Jakarta undertake next?
Visitors who want to stay longer now spend their extra dollars in
Singapore to renew their visa -- or go to and stay Malaysia,
which asks no questions and lets you in for 90 days. There are a
thousand other similar little problems like this -- but let these
symbolic ones stand out and symbolize what, to the investing
buli, is wrong amid so much right.

A hospital is not there to spread disease, Florence
Nightingale so famously stated. Immigration policy, supposedly
set to encourage the major industry of tourism, shouldn't shoot
itself in the foot. But that is what has happened.

It's all about signals. Signals create the atmosphere. A City
of London merchant banker passes on only a few words to his
Frankfort counterpart, of his impressions from his trip to Asia,
as they pass through airports in Istanbul or Rome. "Wow -- the
Thai, they really make it easy for us. What a show they put on at
the airport! Better than home!"

An Indonesian who wants his country to become really and truly
rich should ponder carefully what the Englishman will say of his
visit to Indonesia, where there is so much more to see, so many
more resources -- yet so little tangible interest in letting the
investor -- not to mention the poor tourist -- get on with it.
And all those little impediments when s/he arrives. If you want
to get rich, welcome those who can help you get there with open
arms -- not interminable airport lines.

Dr. W. Scott Thompson, D. Phil. is Adjunct Professor of
International Politics, Fletcher School of Law and Diplomacy,
Tufts University, Medford, MA. The views expressed are personal.