SPOTLIGHT • INDONESIA rupiah during the Asian financial cri-
sis. Tousands of Chinese fled the coun- try after the riots; ethnic tensions in the country remain evident. Zhen Sun, managing director of a
Nanjing garment company called Suntex, said he didn’t think many Chinese textile manufacturers would want to relocate to Indonesia. “We don’t have a lot of information
about [the investment environment in] Indonesia. We have it from Bangladesh, the Philippines and Tailand, but not from Indonesia,” he said. “I don’t feel the relationship is so strong. Chinese people think it’s not safe there.” Another business owner, Peter
Cheung, head of China Ting Group Holdings, a Hong Kong-based garment company, agreed. “Politically, it’s not sta- ble to go to Indonesia … It’s very risky.”
Fragmenting fabrics
Analysts say other factors make it diffi- cult for Indonesia to be able to compete with Chinese imports or attract foreign investment. A labor law was passed in 2003 that requires employers to pay large sums of severance pay to workers who
LISTENING: M.S. Hidayat, Indonesia’s Minister of Industry
are fired, leading the World Bank to rank Indonesia as the sixth most expensive country to fire an employee. An attempt to change the law in 2006 was thwarted by Indonesian unions. Domestic trade restrictions also make
it difficult to ship goods around the coun- try, said Aris Ananta, a senior research fellow at the Institute of Southeast Asian Studies in Singapore. As imports from China continue to rise, more protectionist policies could
also be on the way. In late March, for in- stance, the Ministry of Trade imposed a safeguard duty of US$13 per kilogram on all imported woven cotton fabric imports for the next three years, according to API. A government survey earlier this
year concluded that China had dumped nearly 40 different products in Indone- sia since CAFTA had come into force, prompting Hatta Radjasa, coordinating minister for economic affairs, to tell Te Jakarta Post that the agreement could
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42 China Economic Review • May 2011
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