Europeans told to invest more on back of strong euro

Urip Hudiono, The Jakarta Post, Jakarta

Vice President Jusuf Kalla called on European businesses Thursday to take advantage of the surging euro to buy more Indonesian products and boost their investments here.

"There's never been a better time than now to strengthen our economic relationship by taking advantage of the current situation," Kalla said at a business gathering Thursday organized by the Ekonid Indonesia-Germany bilateral business chamber, the UK's BritCham and the Indonesia Netherlands Association (INA).

"With a strong euro, Indonesia can export more to Europe -- we're already exporting most of our palm oil to Europe -- while Europe can, on the other hand, invest more cheaply in Indonesia.

"You can also enjoy cheaper tourist visits here ... although, I'm sorry to say, Indonesia might not be able to import more from Europe. That may be too expensive for us," Kalla said jokingly to smiles from the audience.

The euro, which is the currency used by the European Union (EU) economies, has recently gained significantly against the dollar amid a projected slowdown in the U.S. economy due to the subprime mortgage crisis.

The euro closed at $1.48 on Thursday.

While a stronger currency increases an economy's purchasing power, it may also affect its production and export costs, and eventually the economy's competitiveness on the global market.

"Two-way trade between Indonesia and the 25 EU member countries up to the end of September reached US$15.3 billion, up nearly 16 percent from the same period last year, data from the Central Statistics Agency (BPS) shows. Total bilateral trade last year stood at $17.9 billion.

Total EU investment in Indonesia has so far amounted to some $1 billion.

Kalla urged the EU economies to overtake or at least match Japan and the U.S. as Indonesia's main trade and investment partners at present, especially given that the Indonesian and European economies are mutually complementary.

"I always say that Indonesia has a better chance to grow than other countries because of all the resources we have -- we have oil and minerals and commodities that Europe needs. Meanwhile, we need more investment for infrastructure development," Kalla said.

"Remember that only the early bird gets the worm, so Europe should always be first to take a chance with Indonesia."

Responding to comments and questions from the audience on what the government is doing to promote trade between Indonesia and Europe, Kalla said the administration was working around the clock to improve its policies, regulations and institutions so as to facilitate business and investment. This included the main concerns of market competition and labor issues.

"Of course, there are still problems, but the same problems also happen in other countries," he said. "We're always working on it."

Kalla said that Indonesia had regulations to ensure healthy market competition. He also warned that an excessively liberalized market might not always be good for business and consumers.

Meanwhile on labor issues, Kalla said the government was working to improve the flexibility of the labor market, while saying that most of the problems usually arose in companies paying unnecessarily low wages.

"I rarely hear about such problems with European investors, as you already pay your workers enough, so they are satisfied and don't create trouble."
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