Global views 'doubt Indonesia'

Riyadi Suparno and Esther Samboh, The Jakarta Post, Jakarta

Indonesia has a brighter investment future than China, but global perception underplays the reality in Indonesia, according to an executive of the European Business Chamber of Commerce (Eurocham).

Eurocham vice chairman Leonard van Hien said here Wednesday that from many perspectives, investing in China is riskier than in Indonesia.

Despite the reality of China's huge market and high economic growth, China has large political problems, especially with questions such as whether the current regime is going to continue as it is or whether it will or can liberalize, as people clearly want.

"So there are political risks in China that are underrated," van Hien said in his paper, which was presented at a seminar on strengthening Indonesia-Europe bilateral relations held at the Sari Pan Pacific Hotel on Wednesday.

Indonesia, too, has problems, van Hien said, but they are not as great as foreign investors elsewhere are accustomed to. It has a degree of political instability which goes with democracy, and it has problems with infrastructure, he said.

"But it also has a lot of things going for it that are understated," he added.

In real terms, he said, European companies don't make much profit in China, as it's just too difficult. And yet companies are still investing heavily in China because they feel they have to be there.

While in Indonesia, companies -- not only European but also American and Japanese companies -- are doing very well.

Van Hien himself is the Indonesia country director of the Jardine Matheson Group of companies, which has made successful ventures in a number of Indonesia's best companies, including Astra International, Hero Supermarket and Jakarta Land.

Indonesia, he said, is comparable to India in many ways, with a lot of underrated potential.

"It is a matter of getting the perception right. In Indonesia -- and in India too -- the perception underplays the reality, while in China, the perception overplays the reality," he said.

In order to correct the perception, Indonesia needs to reduce, or if possible, eliminate big impediments to foreign investment such as corruption and an unreliable justice system, especially the erratic performance of the judicial system.

Van Hien said people would not invest unless they were assured their rights would be protected by fair and impartial judges.

"The perception of corruption, including in taxes, customs and business licensing, also continues to be a major impediment.

"The best way to change the perception is to change the reality," van Hien wrote in his paper.

Meanwhile, economist Lepi T. Tarmidi from the University of Indonesia noted the government had offered incentives to foreign investors, yet they were still reluctant to invest in the country.

"Economic incentives are not sufficient. The Indonesian government must remove the non-economic impediments. Providing economic incentives without doing much to eliminate the non-economic impediments would not attract foreign investors," Tarmidi said.

Lepi likened Indonesia to a beautiful river with gold nuggets at the bottom, the waters of which were full of crocodiles.

"Many investors are attracted to come to Indonesia, but first, get rid of the crocs," he said.