A foreign company is a term used in
Indonesia for an existing company that is registered to do business in
Indonesia state or other than where it was originally incorporated. The use of
foreign company registration allows a corporation to operate in multiple region
as the same organization in all of them. The only alternative would be to
register a separate corporation in each region, and separate every operation
according to the particular region to which the operations are taking place. As
compared to the pre-1997 economic crisis period, Indonesia has been relatively
unsuccessful in attracting foreign company. Foreign companies say many of
reasons for their reluctance to invest in Indonesia. These include corruption,
crime, political insecurity and economic instability. But since the Asian
financial crisis in 1997, Indonesia has become much more liberal in its
economic policies to attract more foreign companies to increase the economic
growth of Indonesia. It is clear that international capital inflows are a
fundamental element in economic performance. Poverty is almost always related
to low or stagnated economic growth and unemployment. It is generally argued
that investment is essential for generating economic growth and creating new job opportunities. Where
domestic resources to finance investment are limited, foreign company inflows
are necessary.
Thereare several reasonsthe
establishment offoreign companiesin Indonesiabesides from Indonesia has become
much more liberal in its economic policies since the Asian financial crisis in
1997. First reason is Indonesia has manynatural resourcesas a raw material. Indonesia is a rich country
in natural resources, it is not impossible if the developed countries with big
capital to make Indonesia as a place to set up their business. With our natural
resources, they do not need to find the raw material to another place, because
whatever material they want is available in our country. The second reason,
Indonesia is a country with a large population, so it has many consumers. Indonesia's large populationis a potentialfor marketingthegoods and
services. The third reason is Indonesia has so many cheap labor. The
level of education in Indonesia is still low, the lack of skill and lack of
jobs makes the Indonesian labor is cheap. With abundant labor and low wages so the
foreign companies founded the company in Indonesia. The last reason is nowaday Indonesia'ssecurity and stabilityis guaranteed. The existence ofstability and securityto makeforeign companiesdoing
businessin Indonesia safely, and comfortably.The
effect of a foreign company in Indonesia to the economy of Indonesia is divided
into two types, that is positive effect and negative effect.
First of all positive effect, the
first positive effect is reducingunemployment. With the
presence of foreign companies in Indonesia that unemployment can be reduced,
because it will increase employment opportunities for job seekers. The second
positive effect is increasing people's welfare. The presence
of foreign companies in Indonesia may increase the welfare of the people and we
do not need to bring in products from the other country, because the foreign products
are produced in Indonesia. The third positive effect is increasing inland
revenue, Indonesia willreceiveincomefrom thetaxes paidby theforeign company. The
next positive effect is application of technology. Those who
work in a foreign company can apply their technology skill as would be trained
previously in which they worked. And then the last positive effect is creating
the competition betweendomestic companyand foreign company. Maybe there are a
lot of innovationsthat happen inthe productionof goodsand services because
Indonesian product do notwant tolose withproduct from the foreign product.
For the first negative effect
is environmental pollution. Foreign companiesinIndonesiacancause pollution, such as water
pollution, airpollutionand evensoil pollution. The second negative
effect is changes in land use. The presenceof foreign
companiesinIndonesiacanlead tochanges inland use. For example, the land
use that should be for agricultural land but the function will switch to the factory whereforeign companies stand. The next part of
negative effect is people do not get the wholly benefit from natural resources
in Indonesia. Actually thenatural resourcesshould be usedfor
the maximumwelfare of the people, but it isnot
fullyenjoyed bythe people, because they have toshare
withtheforeign company. The last negative effect is foreign
companieswilldominatethe local market, so domestic
productscan not compete withforeign productsbecause there are so many foreign
products not only with high quality but also cheaper than domestic products.
Seeing that the existence
foreign company also give some negative effects, society must do something to
overcome the negative effect from foreign company. First step is we have to
love all the domestic products as the society of Indonesia. The second step is increased
promotionby promotingorintroducingproductsthat will be exported,so thatdomestic
products are notto lose competitivenesswith foreign products. And then actually
natural resources can be managed directionally by human resources in Indonesia,
so the dependence of domestic on foreign company can be resolved. Based on this
idea, the last step from society to overcome the negative effect is increasing
more our skill as society especially if we are workers. Eventually we do not
have to depend from foreign company to manage our natural resources.
Not only society to overcome
the negative effects of foreign company in Indonesia, but also what policy that
government must do to overcome the problems. First policy that government can
take is restrict the foreign companies to invest in Indonesia so as not to
threaten the domestic companies. The second policy is development of Small and
Medium Enterprises (SMEs) that aims are businesses of Small and Medium
Enterprises (SMEs) is growing in their
region, but even they can get to the other area. The third step is improvement
export performance means that a government seeking to improve export performance.
The main goal from this policy is the exporters to become more comfortable and
secure in exporting products. Last but not least governmentprovideloancapital
forsmall entrepreneurstoinnovateanddevelopoptimally their capitaland
competewithforeign company.
Finally, foreign companiesas
theimpact of globalizationonthis centurycan neverbe avoided. Besides foreign company widely censured but
seems provide useful benefits for the welfare of the nation. The focus setting
is how to control the negative effects that may arise and how to maximize the
welfare of the people in Indonesia. But it would be nice if to increase the
welfare of society in Indonesia is domestic company not foreign company. As I
have already said, wehave to loveall theproductsthat is inIndonesia. In this
way, we can help domestic companies in their economic activity, so thatit
cangrowmoving forward. Therefore, to help domestic company itneedsfurther
regulationonforeign
company activities. Like I have already said again, it is
necessary for government tosettingpolicy onforeign company. So the welfare of people will be increase by domestic company.
Source : ?
Writer :
Name :Muhammad
Fadhlan
NPM : 120110120147
Facebook link : Muhammad
Fadhlan 
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