Words won't lure investors

Words won't lure investors

Kornelius Purba, Staff Writer, The Jakarta Post, Jakarta,
korpur@yahoo.com

Recently, the growing beard of Japanese envoy Yutaka Iimura
gave the impression among Indonesians that he probably had a
nadar (vow) -- that he would not shave until he succeeded in
convincing President Megawati Soekarnoputri that Japanese
investors would continue to flee from Indonesia, unless she took
extraordinary economic policies to woo back investment from the
world's second most powerful economy after the United States.

According to one of his aides, the ambassador had to shave his
beard when he made a business trip to Tokyo, but he started
regrowing the beard upon his return to Jakarta. His vow might
have led him to grow the beard even longer until he could have
been mistaken for a Taliban member -- while he witnessed the
clumsy progress made by the President and her Cabinet to restore
the chaotic investment climate, and the hardening attitude of the
Indonesian Military (TNI) top brass on Aceh.

"He looks handsome with his beard," said a Japanese banker on
Tuesday, who then pointed out that many Japanese companies had
nearly lost hope regarding the government's seriousness in
regaining the trust of foreign investors. Last year, the total
value of Japanese investment was only US$300 million, and mostly
from small scale enterprises, such as the suppliers of automobile
spare parts.

Japan is accumulatively the biggest money lender to Indonesia
and its private sector is also the biggest investor, while Japan
is also the biggest importer of Indonesian products.

Some American and British businessmen expressed their surprise
when they saw how the usually reserved Japanese executives
bluntly told Indonesian ministers that the government should stop
giving empty promises and instead issue concrete measures for
private corporations.

Their critical view is also shared by other foreign
businessmen and at least one envoy from a neighboring country.
Many foreign companies have abandoned Indonesia, while many
others have decided to stay because they have invested too much
here, and are just waiting for a miracle.

The investors' complaints included rampant corruption,
workers' demands, uncontrollable regional autonomy, taxation
problems, complicated and vicious custom and excise system, and
the greediness of political parties.

But how could President Megawati convince foreign investors to
expand their business to Indonesia when they could not even
understand her message to them? Her address to them last month
was in the Indonesian language.

Also, could the Cabinet expect foreign companies to pour fresh
money to Indonesia, when key economic ministers like Coordinating
Minister for the Economy Dorodjatun Kuntjoro-Jakti and Minister
of Finance Boediono were absent from an event where the foreign
business circle expected a major announcement from the
government?

An Asian businessman, who was invited along with other 300
foreign business executives, to the official launching of Invest
in Indonesia Year 2003 at Istana Merdeka late last month,
described his frustration because the President only used Bahasa
Indonesia in her speech, with no English translation.

It was more upsetting when he realized that the only concrete
result of the ceremony was the signing of the first stamp to mark
the year of investment by the President.

"We are really disappointed, it was just a waste of time,"
said the businessman, who had hoped that Megawati would announce
some new tax incentives, or that they would have the opportunity
to have a dialog with the President or her ministers, an
opportunity often available with former presidents B.J. Habibie
and Abdurrahman Wahid.

But the guests only heard the President's old song -- "We need
to keep improving our economic basics to create a good investment
climate."

The President has visited at least 27 countries and of course,
the state has spent millions of US dollars for her travel
expenses, as she believes her psychical presence in those
countries is very effective to lure foreign investment. However,
it is very difficult for Investment Coordinating Board (BKPM)
chairman Theo F. Toemion to back this up with concrete investment
data.

Foreign direct investment (FDI) continues to decline. FDI
approvals -- excluding those in the energy and financial sectors
-- plunged by 35 percent to US$9.7 billion last year from $15.06
billion in 2001.

Concurrently, domestic investment approvals has nose-dived
even more to Rp 25.26 trillion (US$2.8 billion) in 2002, 57
percent lower than the Rp 58.62 trillion in the previous year.

The problem is that the Cabinet has only been busy making
public statements without concrete policies to convince
investors. In response to severe criticism over the allegedly
crooked Customs and Excise Office, the President only replaced
its chief, and the old system remains -- it has not been changed
into a pre-shipment system as demanded by many.

The labor issue is likely the most crucial for the private
sector. Investors believe the increase in wages should also be in
line with rising productivity.

The President may think investors will come soon to Indonesia
after launching Invest in Indonesia Year 2003, and Dorodjatun
feels confident after making lengthy speeches in various fora.

But as to the measures which should be taken, "There are
hundreds of things that can be done very quickly to improve the
situation," said World Bank country director for Indonesia Andrew
Steer about investment in Indonesia.