Foreign Investment Should not Harm Local Communities

The emergence of businesses owned by foreign nationals in Bali should be accompanied by stronger protection for MSMEs. Their presence should not cause the local people's businesses to suffer losses or even to close down.

RIAN SEPTIANDI

Two foreign female tourists tour the Tegallalang rice terraces, Ubud, Bali, Sunday (16/04/2023)

JAKARTA, KOMPAS — The implementation of the Job Creation Law has provided many conveniences for foreigners to do business in this country, especially in Bali. Companies owned by foreigners on the Island of the Gods are engaged in a number of businesses, such as property, meditation places, lodging, commercial residences, cafes and motorbike rentals.

Head of the Center for Industry, Trade and Investment of the Institute for the Development of Economics and Finance (INDEF), Andry Satrio Nugroho, said the passing of Law Number 6 of 2023 concerning the Stipulation of Government Regulation in lieu of Law Number 2 of 2022 concerning Job Creation has enabled foreigners to open businesses easily. However, if their businesses harm local residents, additional regulations are needed at the regional level.

"If it turns out to be detrimental to the local residents, there should be restrictions on what types of business foreigners can or cannot do. Unfortunately, since the Job Creation Law was introduced, everything has become completely centralized regarding business permits. It must be revised and there must be regional regulations specifically to deal with such a problem," said Andry when contacted from Jakarta, on Thursday (25/5/2023).

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Andry noted that the presence of foreign-owned businesses in Bali should be able to create jobs for the local people. For this reason, there should be business collaborations between foreign-owned businesses and local micro, small and medium enterprises (MSMEs).

"Broadly speaking, our employment has decreased. Don't let the presence of foreign-owned businesses in Bali only benefit the foreigners themselves," said Andry.

According to Andry, regional regulations (Perda) need to include conditions related to the involvement of local residents in businesses carried out by foreigners. If anyone violates those regulations, the sanction can be in the form of the revocation of their business license.

"When such regional regulations are drafted, there should be dissemination and public hearings, so that foreigners also understand some of the conditions that must be met before opening a business," he said.

Don't let the presence of foreign-owned businesses in Bali only benefit the foreigners themselves.

According to the Job Creation Law, only with a capital of Rp 10 billion (US$668,000), a foreign national who holds a tourist visa can establish a business in Bali.

Kompas previously discovered a motorcycle rental business belonging to Russian citizens who were suspected of employing foreign workers. This business was run by a legal business entity with an investment value of Rp 10 billion.

When a consumer wants to rent a motorbike, a Russian citizen with the initials MP serves and delivers the motorbike to the client’s location. From Kompas' investigation, MP only holds a Visa on Arrival (VoA), which should not be used for economic activities. The other motorbike rental owner only has a tourist visa.

KOMPAS/PRIYOMBODO

A foreign tourist rides a motorbike without wearing a helmet in the Kuta area, Bali, Saturday (18/3/2023).

The multiplier effec.t of one foreign worker can create jobs for three or four people [local residents]

Deputy for Development of the Investment Climate at the Investment Ministry/Investment Coordinating Board (BKPM), Yuliot, said there were no technical arrangements for business sectors engaged in renting two-wheeled vehicles to support tourism, including details on arrangements for foreign investment in the business. Therefore, businesses with 100 percent foreign ownership are allowed to carry out business activities that are mostly on the MSME scale.

"They can make a PT (entity) with a tourist visa, with a minimum capital of Rp 10 billion," said Yuliot.

According to Yuliot, restricting access for foreign investment and big businesses is not wise. The presence of foreign investment, based on data from the Investment Ministry, can trigger an increase in domestic investment in related areas, including those who have foreign workers. "The multiplier effect of one foreign worker can create jobs for three or four people [local residents]," he said.

Increasing competitiveness

Instead of prohibiting foreign investment, a wiser step in protecting local MSMEs is to increase the competitiveness of business factors. Guidance and assistance should be given, among others, by the Cooperatives and Small and Medium Enterprises Ministry and local governments in the form of granting business licenses, providing business locations, increasing competency and certification as needed, and facilitating financing.

Another step is to ensure the partnership between large businesses and MSMEs. Large businesses must partner with local MSMEs if they run a motorbike rental business, according to Presidential Regulation Number 49 of 2021 concerning Amendments to Presidential Regulation 10/2021 concerning the Investment Business Sector.

Head of the one-stop integrated service and investment office (DPMPTSP) in Bali, AA Ngurah Oka Sutha Utama, said regional governments had limited authority in taking action against violations of foreign-owned business entities. So far, local governments have the authority to supervise and report suspected violations to the Investment Ministry/BKPM.

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"If someone already has a permit, if he is a foreigner, the authority lies with the ministry. At best, we can only report our findings to the ministry," he said.

Many reports

Oka said that lately he had received many complaints directly or from social media regarding foreign businesses that violate the rules. The foreign-owned business, for example, did not involve local people as workers and chose to employ foreign workers.

"[Supposedly] he can employ foreign workers, as long as there are no local residents who have qualifications in that field of work or are required to transfer knowledge," he said.

To suppress rampant business violations by foreigners, the Provincial Government of Bali is also preparing a policy. "The regulations are still being reviewed. Whether it will be in the form of a regional regulation, it is still being studied," he said. (JOG/FRD/DVD/ILO)

This article was translated by Hendarsyah Tarmizi