Kamis, 25 Oktober 2012

The Effect of Foreign Company in Indonesia to Economy of Indonesia

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.

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Name             :Muhammad Fadhlan
NPM     : 120110120147
            Facebook link : Muhammad Fadhlan

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