Just Do It instead of playing blame games

Business Times - 07 Aug 2007

Indonesia must step up moves to improve its investment climate to retain foreign players

By THANG D NGUYEN

IF you want to solve a problem, the first step is to acknowledge it exists. But sadly, this is not the case with some people in Indonesia, who like to blame foreigners for many things that go wrong in the country.

Take the case of Nike. Recently, thousands of workers from Naga Sakti Parama Shoes Industry (Nasa) and Hardaya Aneka Shoes Industry (Hasi) took to the streets in rallies against the American athletic apparel company because it ended working contracts with them.

Nike said it did this because of poor quality and late deliveries.

But the workers thought otherwise. Carrying banners like 'I hate Nike' and 'Go to hell Nike', they demanded the company restore its contracts with their factories - and denied the problems that Nike said it had.

What these workers do not realise is that Nike is not responsible for their problem and therefore they are not entitled to seek compensation from it.

'Nike is only a buyer - not the investor who owns the factories and employs the workers,' Nike spokesman Maretha Sambe was quoted by The Jakarta Post as saying. Furthermore, Nasa and Hasi were given the chance to improve their production quality and retain their contracts with Nike. But they failed.

'Nike had already warned them of their sub-standard output and other problems in March this year,' said Nike's director for corporate responsibility communications Erin Dobson.

And 'because there has been no significant change in quality and delivery, Nike headquarters sent termination notices', said Maretha Sambe.

Like many Indonesians, Nasa and Hasi workers do not realise that in today's global economy, making a good product is no longer enough for investors or buyers.

They demand the best product in terms of both quality and production cost. And if this demand is not met, they will go somewhere else where it can be met.
That's exactly what Nike did. It shifted orders to 37 other sports-gear factories in Indonesia to meet its demand.

What's more, Nike, which started sourcing from Indonesia in 1989, said this week that it remains committed to doing business with Indonesia despite the problems it has had with Nasa and Hasi and despite the worker protests. Nike could have shifted its orders to India, China or Vietnam. It could have wound up doing business with Indonesia because of the problems it has faced and the Nasa-Hasi protests. But it did not.

As opposition against Nike mounted, the Indonesian Investment Coordinating Board (BKPM) intervened and helped resolve the dispute.

And the outcome is positive: Nike agreed to extend its contracts with Nasa and Hasi, ending weeks of confrontation among the parties involved.

Still, the Nasa-Hasi protest reminds us of how challenging Indonesia's business or investment climate is.

Besides labour laws and worker protests, foreign investors face a host of issues including corruption, inadequate infrastructure, political instability and legal uncertainty. Together, these issues raise the cost of doing business and drive investors away.

To be fair, the Indonesian government does recognise the problems. Since taking office in October 2004, the administration of President Susilo Bambang Yudhoyono has taken numerous steps to improve the investment climate.

It has held two major conferences to lure foreign investors for infrastructure projects, though little has resulted from these events.

There are major problems, like poor infrastructure as traffic jams in Jakarta and Bandung are getting worse day by day.

Mr Yudhoyono, who campaigned for fighting corruption among other things, set up the Corruption Eradication Commission (KPK). And for about three years, KPK did a good job, filing several high-level cases. But earlier this year it was dissolved, even though its job was far from completed.

If anything, now is the time that the Mr Yudhoyono's government needs to do more - not less - to carry out its economic, legal and social reforms.

If not, distrust will only intensify. For foreign investors, it will be distrust in Indonesia as a place to do business. And for Indonesians - particularly those who voted for Mr Yudhoyono - it will be distrust in democracy.

The writer is a Jakarta-based columnist. His writings can be read at www.thangthecolumnist.blogspot.com

Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.