Competition from State Owned Enterprises

U.S. companies receive significant competition from State-Owned Enterprises in Indonesia. Indonesia has state-owned enterprises in many strategic sectors, including banking and finance, transportation, energy and mining, electricity, telecommunications, and agricultural products. Some state-owned enterprises maintain monopolies for service provision, such as state-owned electric company PT. PLN for electricity distribution, PT. Telekomunikasi (Telkom) for fixed-line telecommunication, and PT. Pertamina for fuel distribution outside of the Jakarta area.

In 2010, Indonesia’s Ministry for State-Owned Enterprises began acting on plans to open up some SOEs to private investment, most notably steel manufacturer PT Krakatau Steel, and plans for an IPO for state-owned airline PT Garuda Indonesia for 2011. In Indonesia, there is broad public support for SOEs in strategic sectors due to large nationalist sentiment.

Corporate Social Responsibility

The public’s expectation that businesses operating in Indonesia are aware of and implement CSR is high despite clear guidance regarding CSR. Article 74 of Law No. 40 of 2007, enacted on August 16, 2007, mandates that “companies doing business in the field of and/or in relation to natural resources must put into practice Environmental and Social Responsibility.” The legislation states that this provision “constitutes an obligation of the Company which shall be budgeted for and calculated as a cost of the Company performance of which shall be with due attention to decency and fairness.” Companies which do not meet this obligation shall be liable for sanctions in accordance with the regulatory provisions. Despite considerable opposition from the business community, the Constitutional Court upheld the provision in April 2009. Implementing government regulations have not yet been enacted.

Political Violence

Public reaction, including anti-U.S. demonstrations to events in Middle East continues to be limited to sporadic protests, mostly nonviolent. President Yudhoyono has demonstrated a strong commitment to combating terrorism. There have been successful police investigations (e.g. the successful prosecution of several prominent terrorist leaders), and the discovery of evidence linking terrorist activities to radical Islamic beliefs have had a constructive effect in turning general public opinion against terrorism. Many members of Jemaah Islamiyah, however, are still active and they have a number of supporters.

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