That’s the message the U.S.
Chamber of Commerce is bringing to Indonesia’s leaders this week.
Washington, D.C.-based Myron
Brilliant, senior vice president of the international division of the American
business group – which represents the biggest and smallest companies in the
world’s biggest economy – says American companies are more interested in
Indonesia than they have been for years. However, few newcomers are committing
much to Southeast Asia’s largest economy yet, he says, as the regulations
sometimes seemed stacked against foreign firms.
“We’ve seen an increase of what
could be described as forced localization” whereby officials push policies
promoting local products over international ones, he told the Wall Street
Journal.
While the United States
historically has been one of the top investors in Southeast Asia, it wasn’t
even among the top five countries in terms of foreign direct investment in Indonesia
in the first quarter of this year. Money invested from the U.S. lagged well
behind that from Singapore, Japan, South Korea and even the Netherlands during
the quarter.
Trade between the two countries
also does not reflect the relative sizes of the countries and their
populations, said Mr. Brilliant, who is scheduled to discuss the Chamber’s
concerns with Indonesia’s trade minister and others during his visit. Despite
being the largest economy in the Association of Southeast Asian Nations,
Indonesia only accounts for around 11% of America’s exports to the ten-member
economic bloc.
“We have a bigger trade
relationship with Panama, which is only 3.5 million people,” he said.
While Indonesia has long been one
of the more difficult places to do business for local as well as international
companies, analysts and executives say it seems to have been cranking up
controls on key sectors in the last year.
It has unveiled new barriers to
imports as well as tighter restrictions on investment in banks and mines. It
has also ratcheted up taxes on the country’s key commodity exports and told
exporters of many minerals they have to start processing their raw materials in
Indonesia.
The U.S. Chamber is particularly
concerned about regulations that seem aimed at forcing import substitution as
well as the rewriting of long-standing oil and gas contracts with companies
that have already invested a lot of money to develop Indonesia’s rich natural
resources.
Too often the companies directly
affected by the new regulations are not consulted, and the first they hear of
them is in the local media reports or even after they are approved, company
leaders say.
“These regulations are being
drafted in the dark,” Mr. Brilliant said.
Indonesia’s trade minister and
other leaders say the country is not turning protectionist, rather it is only
just starting to apply certain standards that are the norm in other countries.
They also say they are trying to ensure the benefits of the country’s recent
strong growth are enjoyed more widely, and that the right incentives are in
place to encourage local companies to invest.
Indonesia has the right to manage
its economy and companies as it pleases and with the resurgence in
international interest in its markets in recent years, it’s logical the country
would rethink some of its regulations, analysts and executives say. However if
it wants to avoid scaring off new foreign fans of the archipelago, it needs to
be clearer about the reasoning behind the changes and more transparent about
the process through which they are made, investors say.
American companies have the
capital, the technology and the know how to help Indonesia build its
infrastructure as well as its information technology, health care and education
industries, said Mr. Brilliant. But the companies that are considering coming
here need to know they will be able to make money and at least be consulted as
the rules evolve.
“There is lot of interest in
Indonesia now but as long as it doesn’t have enough success stories for foreign
businesses, you will not see much new investment” outside of additional money
from companies that are already here, he said. “This is going to hurt Indonesia
(in the) long term.”
Eric Bellman
Business & Investment Opportunities
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