A cloud remains over critical new foreign investment in Indonesia, despite most established West Australian and Australian businesses reporting only marginal impact on their Indonesian operations in the wake of the recent Jakarta bombing.
New foreign direct investment in Indonesia, which has declined since the Asian Financial Crisis, is something widely recognised as critical in reversing Indonesia’s huge unemployment and poverty problems.
Curtin University Media, Society and Culture faculty dean Colin Brown said while there was a growing, albeit unfortunate, climate of acceptance among established foreign operators in Indonesia to bombings, the threat did not help new foreign investment (FDI).
However, he also said the most recent bombing had been more a political statement than an economic attack and that new FDI was also being stifled by corruption, political uncertainty and the surprising high cost of the economy.
Along with greater security, Professor Brown said the resumption of investment would be aided by the conclusion of the election process next month, but whether that translated into direct new foreign investment was “the $64,000 question.”
He said that the incumbent president, Megawati Soekarnoputri’s perceived indecisiveness had so far been a turnoff off to foreign investment.
But the other presidential candidate Susilo Bambang Yudhoyono (SBY), who the polls have indicated has a formidable lead in the final presidential voting round, has said significantly increasing FDI is critical to his goal of increasing annual GDP growth from 4.7 per cent to 7.6 per cent.
“But the proof of the pudding will be in the eating,” Professor Brown said.
WA manufacturer Caterlink, which manufactures stainless steel kitchen furniture at factory in Surabaya, is one business that has been forced to rethink its Indonesian plans.
Caterlink managing director Hadyn Chrystal said although the business has been established for almost 10 years in Indonesia and now successfully exported to eight countries, its domestic plans to supply the massive hotel market in Indonesia had been stymied by the local security concerns on numerous occasions.
However, he said fellow WA businesses in Indonesia were encouraged by Mr Yudhoyono as the potential new president and his cabinet appointments would be eagerly watched.
