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The FDI in Indonesia
The crisis also set back the FDI approvals in Indonesia by 5 years. The largest value of FDI approval was set in 1995 with 782 projects worth US$ 40 billion. Eversince the crisis begun, the value of FDI approvals in Indonesia tends to stabilise at around teens of billion of US dollar. The FDI approvals and other le-gal procedures offer appropriate incentives and facilities. To earn these ones, investors are required to deal first with:
1. The Ministry of Justice and Human Rights to have article of association.
2. The tax office to have tax-payer registration number (NPWP).
Investors are also required to submit to BKPM several applications such as:
1. Limited importer number (APIT) license.
2. Foreign manpower plan (RPTKA/TA.01) approval.
3. Approvals on customs of both capital goods and raw material with the re-spective master lists attached.
The investment laws require the investors to apply for permanent business li-cense (IUT) once their production process has reached to the commercial stage.
Japan as the Ultimate Indonesian Economic Partner
Japan has been the most important economic partner of Indonesia both in the international trading sector and investment area. The total FDI of Japan in Indo-nesia remains the biggest, i.e. around 13% worth US$ 34 billion. Its contribution has been fluctuative.
The declining investment trend in Indonesia, observed by country of origin, shows that prior to crisis, Japanese companies once got FDI approvals in Indo-nesia in 1996 worth US$ 7.66 billion or equivalent to 26% of the total; in 1995 by US$ 3.78 billion (10%) and in 1997 by US$ 5.39 billion (16%). The annual FDI approvals of Japanese companies in Indonesia during 1998 to November 2004 was around US$ 1.15 billion in average.
In the meantime, Japan as the country of destination of Indonesian exports tend to decline from 50% in 1984 to a level of 19% in 1998 and stabilised at the level of 23% eversince.
Interdependency has become globalised. US as the world's largest economy has been very much dependent with Japan's economy as the second largest economy in the world. And the greatest driver of growth in Japan's economy by far has been the good old-fashioned fiscal pump-priming.
Long-time mired in recession has not made the Japanese companies to restruc-ture themselves domestically in a speedy way as foreign investors want them to. Though some analysts agreed to the fact that they actually do enhance share-holders' value by increasing return on equity and return on assets.
All these years, Japan has been prospering very well, taking the advantages of utilising the principles in comparative price competition. All kinds of mass pro-duction, mass consumption, industrial relocation, in-house production and other similar conducts leads to a large reduction in production costs and in turn lower-ing the price of products.
It has not been healthy due to the brain drain of Japanese skilled labours to the countries in which the multinational companies relocated their manufacturing plants. Also the role of countries the Japanese companies have been competing with. Wealthy countries have been the primary competitors of the Japanese companies.
Pakistan’s FDIs Worth US$ 10.5 million
BKPM has approved 38 FDIs submitted by Pakistan’s businessmen from 1997 up to November 2004. It is worth US$ 10.5 million. According to our records, there were 5 Pakistan companies having acquired the PMA status in Indonesia in 1996. They were Gamaluxindo, Moltex Sport Indonesia, Mumtaz International Group, Safran Trading Indonesia, and Shemsy Polaindah Indonesia.
Here is a list of some Pakistan’s companies registered in Indonesia as a PMA company:
1. Alibaba Oriental Enterprise, PT
2. Alsultan, PT
3. Artistic Jaya Furnindo, PT
4. Burana Pakindo Pratama, PT
5. Dhali Indo International, PT
6. Durani Carpet, PT
7. Essatex Indonesia Tekstil, PT
8. Gamaluxindo, PT
9. Hussaina Tradexindo, PT
10. Indo Pak Trading Corporation, PT
11. Indo Majahid Impex, PT
12. Inter Wood, PT
13. Mars Indonesia, PT
14. Moltex Sport Indonesia, PT
15. Multi Fajar Metal, PT
16. Mumtaz International Group, PT
17. Pakindo Trading International, PT
18. Royal Wood Indonesia, PT
19. Safran Trading Indonesia, PT
20. Saralux Niaga, PT
21. Shahzab Salwaindo Trading, PT
22. Shemsy Polaindah Indonesia, PT
23. Surya Estate, PT
24. Tabriz Oriental Carpets, PT
25. Tama Rido Jaya, PT
26. Taqvi, PT
27. Tijarah Bahar, PT
28. Turkman Carpet, PT
29. Wicky Fancy Textiles, PT
30. Woodlinx Worlwide, PT
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September 2009
