Q1 ANS

In Indonesia, the government use political

decentralization in order to manage the country. This is

good for the country use decentralization to dominate the

country because it will cause the country more efficiency,

increase the productivity and more clearly understand the

authority distribution. The definition of political

decentralization is allocate more authority to the citizen,

represenntative officers in decision making (Ciesin, n.d).

It also support with the pluralistic politics and

representative government officers and also associated with

the democratization by giving to the citizens (Ciesin, n.d).

Besides that, it also can encourage more participation in

decision making and more concern about the interest of

society and citizens. It also can let the people better know

about their government representative in certain area and

allow the officers clearly understand the demand of the

particular people. However, the political decentralization

also have certain negative impact to the Indonesia. Here are

some disadvantages of political decentralization as below:

(1) Corruption- It is a common social problem in many

countries. If the government allocate too more

authority to the representative officers, it cause them

have the chance of perform the behavior of corruption

because they can hide the matter and hard to discover

the truth due to the authority problem. For example,

the representative can benefits from assistance money

such as take some money from it and the government will

not realize the truth. In addition, the ‘corruption’

can cause another social problem such as bribery,

kidnapping, sexual-harassment and more. This is another

serious problem that I think the government need to

solve it before it become more serious than before.

(2) Economic uncertainty- The authority that hold bythe representative government officers will cause the

economic uncertainty because it can control the trading

between the domestic and foreign country. For instance,

the officers can use their authority to import the new

product and technology or control the annually volume

of trading certain goods such as foreign car import,

the price of sugar and more. Therefore, it will cause

the certain hold the power of control certain product

and services.

(3) Policy and regulation- This is also another

problem of the representative hold too much of

authority. If the representative hold too much

authority and make them it can make the new policy

without concern about the interest of citizen, it can

cause the many problem. For example, the representative

make the new policy due to the certain issue or action

against his interest but it will cause to the citizen

more complicated, therefore, it reduce the national

development of the country. Besides, the useful policy

and regulation can reduce the efficiency due to the

certain policy make the process more complicated.

Therefore, in order to control those problems effectively,

the Indonesia government already implementing some

legislation to against the problem. Although the

decentralization can bring benefits to the Indonesia, but

there is nothing perfect things in the worlds, it will also

bring the negative impact to the Indonesia government. There

are some reason that Indonesia government implementing the

legislation:

(1) Control the stability of society- the government

can control the stability of society through the

legislation and rule and regulation because the people

will aware of those legislation and they will prevent

doing those things. In addition, those legislation can

give the authority to the officers to punish those

people perform action are illegal such as corruption,

bribery and more.

(2) Understand the policy- investors will understand

clearly about the policy and legislation of the

Indonesia, therefore, they can start their investment

without perform the action are illegal. Besides, those

legislation can protect the interest of the investors

fined by the unnecessary things.

(3) Improve the efficiency of production- Due to the

investors know well of the legislation of Indonesia,

so, they will think about the best solution solve the

problem without perform the action is illegal and

reduce the productivity. Besides that, it will increase

the stability of society and country.

Conclusion: In conclusion, the political decentralizationcan bring the positive impact to the Indonesia but also can

bring the negative impact at the same time. So that, in

order to implementing efficiency, government need to

implementing the legislation in order to protect the

interest of investors, control the stability of country,

increase the productivity and more.

Q2 ANS

Foreign business investment is a risky investment whenthe investors make the wrong decision and it can influence

the company performance badly. Normally, the foreign

business company will consider carefully when they decide

invest in particular country because they will suffer

obstacles more significant than the domestic business. There

are some obstacles that will face by the foreign and

domestic business as below:

(1) Currency floatation

(a) Foreign business- It also call exchange risk.

Foreign investment business will more significant

suffer this obstacles because they usually pay the

dividend and trade by using their home currency

(Kirchhoff, n.d). For example, if their home

currency greater against than the invested country

currency, the revenue will become less because it

need to change into their home currency. If the home

currency weak against than invested currency, their

revenue will become higher. In addition, if the

currency suddenly is not stable and drop

dramatically, they will losing their capital and

influence the company financial performance. Another

problem is most of the country will control the

money that the limit of investors can bring out to

the country (Kirchhoff, n.d).

(b) Domestic business- Normally, the currency

floatation that suffer by the domestic business is

not more significant. The reason is the domestic

business less use foreign currency for trade and pay

the expenses and familiar with the trend of their

own currency. Besides that, the government les

control the limit of cash inflow within the country

of their own currency.

(2) Dramatic Change

(a) Foreign business- Investor normally doesn’t know

well about the characteristics of the invested

country in example of language, political condition,

economic situation and more (Kirchhoff, n.d). So

that, the investors will miss the chance or alert to

protect or enhance their business. For example, when

the invested country occur political issue,

revolution, war and more, it will cause the economic

situation of the country will drop dramatically and

all the business in that country will be influence

also. Besides, the communication problem caused by

the language different also will make the investors

can’t understand clearly the current situation or

hard to communicate with the businessman and

officers. So, investors need to clearly understand

the situation of the country in order to reduce the

risk of foreign investment

(b) Domestic business- Domestic business will suffer

less dramatic change than foreign business due to

they invest in their own country and they more

familiar with the current situation of the country.

Sometimes, they can predict what is the next trend

of the economic, currency and more and prevent

suffer loss from them. In addition, they don’t

always face the communication problem and know the

language well.

(3) Market characteristic

(1) Foreign business- Market characteristic included

economic situation, legal system, social problem and

more. Investors normally don’t understand clearly

about the market characteristic and it cost extra

expenses although the cost of set up foreign

business investment is high (Kirchhoff, n.d). For

example, if the investors doesn’t follow the rule

and regulation of the particular country, it will

penalty from fines, extra expenses, legal issue and

more. If the matter become serious than before, the

investors may force to cancel their investment

project immediately. In addition, the particular

government will control the investors’ asset and

property thorough the rule and regulation and face

the higher transaction cost and tax fees.

(2) Domestic business- Due to the local company know

well of the market characteristic in example of

economic situation, political issue, rule and

regulation and more, therefore, they know how to

prevent charge extra cos and increase the sales and

revenue in short run. In addition, the government

less control the administration of the domestic

business company and charge less tax to them.

Conclusion: In conclusion, the foreign business company face

more obstacles than domestic company because they normally

don’t understand clearly about the economic situation, trend

of currency, legal system of particular country and they

will face more problem than domestic business. Therefore, I

suggest foreign business company better investigate the

particular before make the decision.

Q3 ANS:

Definition of skill labor: Skilled labor means the job

that they are performing required specialized skill,

knowledge and training. These labors can find in both white

and blue-collar workers in need of high level of skill. Some

of the very high skill labor works as professionals such as

doctor, lawyer, scientist and more (Mahuron, n.d). Examples

of sill labor are electricians, law enforcement officers,

computer operators and more (Mahuron, n.d).

Definition of unskilled labor: These types of labor means

that the job doesn’t required any or less skill, knowledge

in order to perform their work. Some of the job doesn’t

conduct any or less training. The workers themselves also

don’t own very high skill, specialized knowledge. For

example, previously the works done by manually, now the work

assisted by machine, therefore they only need own little

knowledge of computer and supervise the working process

(Mahuron, n.d). Examples of remaining unskilled job are

laborers, grocery clerks, hotel maids and more (Mahuron,

n.d).

Impact of Unskilled Labor- Company

Advantages- Unskilled labor suitable work on production,

front line jobs in example, workers in production line,

cleaning workers, waiter and more without increase the

demanding the consumer cost (Vitez, n.d). The primary reason

is the low cost because most of them low skill, knowledge

and required minimum wages in order to maintain their living

expenses.

Disadvantages- The current situation of Indonesia of the

education level of labor is only 36 percent of labor have

more than 12 years of schooling in the case study. It means

that there are less skill labor nowadays. It is a serious

problem that will influence the attraction of foreign

business investment These are several example of negative

impact as below:

(1) Labor cost- It is necessary for providing the

training, education program and more in order to

improve their skill and better qualified their job

(McQuerrey, n.d). Therefore, the expenses will increase

and maybe the outcome doesn’t conform with the

company’s goal.

(2) Lower productivity- Labor with limited skill will

be less productivity than skilled labor because they

don’t have the certain the knowledge or skill to high

productivity and maybe they think they no need beyond

to the job requirement due to the low position

(McQuerrey, n.d). In addition, they also less

efficiency in planning to change the production in

order to meet the customer demands. The productivity of

the high-tech company in example of biotechnology

company, chemical factory, pharmaceutical technology

company and more will have less productivity due to the

shortage of skill labor and can’t meet the demand of

customer on time. This is one of the reason of the

foreign business concern if they set up production in

foreign country. Besides, it will also influence the

performance of domestic business

(3) Turnover figures and shortage of unskilled labor-

Normally, the unskilled workers paid by less salary

than professional workers and it is hard for them to

cover the living expenses (McQuerrey, n.d). So that,

they stay in a company for a short period until they

successful seek the higher salary job than current. Due

to the percentage of skilled and unskilled labor are

more unskilled labor. It will be a barrier for the

domestic and foreign company set up the their plant due

to the shortage of skilled labor and need import the

foreign labor and increase the expenses. In addition,

the company will hard to develop in other area because

of the shortage of skilled labor and it only can do

well in certain area.

(4) Safety hazards - Workers who are not familiar with

the operating of machine will have implied the risk of

safety problem (McQuerrey, n.d). The primary factor is

they don’t own the certain skill or knowledge and the

company will suffer the penalties of the accident

happen such as legal claim, legal appeal and more and

influence the reputation of company.

Q4 ANS

Although the Indonesia government implementing a lot of

policy in order to attract the foreign business investment,

the investors still feels some of the rules and regulations

and policy to block them 100% invest in the country.

According to the chat below, although the foreign direct

investment (FDI) growth rate of Indonesia increase rapidly

from USD51500 Billion in 2012 to USD78700 Billion in Jan

2015, the growth rate will start to decrease if the

government still not solve the rules and regulations and

policy. There are some implication that block the foreign

business investment:

Table

(1) Limitation of foreign ownership- According to the

Osmond (2009), the investors can own all the ownership

of the investment company in the country, but,

investors need to divest portion of share to an

Indonesian party such as energy and mineral resources,

healthcare, transportation and more. For instance, in

the provision of content services industry, the

investors only can own ownership with the maximum of

49% (before 24 April 2014, the ownership of foreign

investors was unlimited) (Allens, 2014). Some of the

business field need to corporate with Indonesian 15

years. This action will make the investors they can’t

directly control their company in Indonesia and can’t

gain the profit fully because they can’t gain revenue

of the equity fully.

(2) Banned sectors and local joint venture partner-

Some of the industry that are not currently open to the

foreign investment and that will be a barrier for

investors to invest in the country (Allens, 2014). For

instance, culture and tourism, transportation,

communication and informatics and more (Allens, 2014).

Those industries maybe own by the government and they

don’t want share profit with the foreign investors.

This is a bad new to the government and foreign

investors because they maybe can increase the industry

productivity to the new point and increase the revenue

and profit for each other if they corporate with each

other. Another point is the foreign investment require

have the arrangement of local joint venture partner.

The government stated that the foreign investment

project need to associate with at least one local

Indonesian partner to corporate (KPMG, 2013).

(3) Complicated procedures- The procedures of set up a

investment project in Indonesia is very complicated

because it need to go through many department in order

to get the permission and it is time consuming. For

example, the foreign investors need to submit the

application form to BKPM department and it included

many information such as flowchart of the production

process, power of attorney and more. After get approval

of BKPM, the investors need to establish the limited

liability company by executing a Deed of Establishment

and it need to submit to the Ministry of Laws and Human

Rights of Indonesia government (Osmond, 2009). So that,

you can find that the procedures of invest in Indonesia

is very complicated. In addition, the government also

stipulate the foreign investors need to set up their

representative office in the country and it must have

the relationship with the Indonesia partnership. Those

policy will be the barrier of the foreign investors to

plan their investment project in the country because

the procedures are time consuming because in the

opinion of the foreign investors, ‘time is money’ and

they maybe they will suffer damage due to miss the best

timing to invest.

Conclusion: In conclusion, the issues that faced byforeign business investors is complicated ownership,

ownership problem, banned sectors and more. These issues

will take into consideration of investment project in the

decision of foreign investors. I suggest the government need

to simply these issue as soon as possible because nowadays,

more and more country start to practice open to foreign

investors policy and it is very competitive.

Q5 ANS

Recently, Indonesia government already implemented some

policy in order to attract the foreign business investment.

We can find that the total amount of foreign business

investment increased rapidly from $51500 Billion IDR in 2012

to $78700 Billion IDR in 2015 (Tradingeconomics, n.d).

Therefore, those policies already successfully increase the

amount of foreign business investment of Indonesia. However,

I suggest the government can implement some policy in order

to attract more foreign business investment at below:

(1) Simplifying the approval process for foreign

investment- It is also another important element to

attract the foreign business because most of the country

doesn’t improve in the process although they have the

very attractive policies to attract foreign business

investment. The government can simplify the approval

process in order to attract foreign business and reduce

the workload of authorities and more focus on other

issues (Jonesday, 2010). For example, encourage and

permitted investment project worth US$100 million or

above need to get the approval of central government of

Indonesia. Any other investment projects below US$100

million can get the permission of local state government

levels. However, the approval structure for the projects

still falling the restrict rule and regulation and

remain unchanged (Jonesday, 2010). In addition, the

government strongly encourage give more delegation to

respective local state government in order to process

the foreign investment project.

(2) Preferential tax and subsidy policies- The government

can facilitate the foreign business investment in other

area of Indonesia. The economy and infrastructure of

other area of Indonesia maybe are not as complete the

capital of Indonesia, Jakarta. Therefore, the government

can encourage foreign business invest in those area in

order to improve the economy situation of Indonesia also

in the Jakarta. For example, the government offer new

the tax policy within the short period of time and the

taxation is more less than original before (Jonesday,

2010). In addition, the government also can offer the

tax free in the other area of Indonesia and the foreign

investors will attracted by the new policy. The new

incentives also will encourage the foreign investment

company move to the certain area and they will benefits

from the new tax policy. Besides, the government also

can offer subsidy to the foreign investment if they meet

the requirement. For example, if the investment company

set up their plant in certain area of Indonesia, they

can enjoy the subsidy of operating cost in order to

maintain the expenses.

(3) Increase the stability of Macroeconomic- This is also

one of the important element for foreign business

company decide whether want to invest in that particular

country or not. It include many aspect of macroeconomic

in example of social, economic situation, political

stability and more. Investors will feel more confidence

if the macroeconomic of the country more stable. For

example, the two political parties always conduct the

demonstrations in order to fight for the power of

control government, it will cause the country’s

political not stable and the investors will

disinvestment. In addition, corruption also seen as an

another problem that will influence the company

performance. Therefore, the government need to solve the

problem such as restrict the law and rule and regulation

to control the corruption problem, conduct the seminar

about the advantages of anti-corruption, solve the

grievances between the political parties and more.

Besides, the government also can improve their national

development such as increase the productivity and the

total amount of export goods, increase the living

standard and more. It can improve the reputation and

built the image of government if the country’s

macroeconomic is stable.

Conclusion: Although the Indonesia government already

implemented many policy in order to attract the foreign

business investment, they still need to solve the stability

of their own country. Nowadays, investors more attracted by

the stability of the particular country no only the policy

that implemented by the government. Therefore, the Indonesia

government need to improve the particular issue in order to

attract more foreign investment.