Wed, 20 Dec 2006
From: The Jakarta Post
By Urip Hudiono, The Jakarta Post, Jakarta
The government expects to attract more investment next year based on the progress it says it has made in completing three policy packages on, respectively, improving the investment climate, infrastructural development and financial sector.

The business community, however, spearheaded by the Indonesian Chamber of Trade and Industry (Kadin), remained critical of the progress achieved, stressing the importance of "implementing the policies" rather than "satisfying target deadlines."

Coordinating Minister for the Economy Boediono and a number of economic ministers presented their takes on the progress made during a meeting Monday with the business community and envoys from nations from which the government hopes to see more investments coming.

"Overall, Indonesia's macroeconomic position has improved. We intend to maintain this, and expect better things to come," he said during a media briefing after the meeting.

By the end of November, the government had completed 35 out of a total of 85 policy actions under the Investment Climate Improvement Policy Package it issued in February.

Among the crucial actions finalized were the submitting of the tax and investment amendment bills to parliament, the simplifying of trade and business licensing procedures, the overturning of unhelpful local regulations and taxes, and clarifying the tariffs to be charged on products.

Regarding the Infrastructure Policy Package, also issued in February, the government said as of the beginning of December it had completed 84 out of 100 policy actions, including new rules on the establishment of public-private partnerships, risk-sharing and land acquisition for major infrastructure projects.

It will hold tenders for 10 "model" projects next year, as well as set up revolving funds and other support facilities.

It also claims to have completed 34 out of 40 policy actions under July's Financial Sector Policy Package, including steps to further reform the banking sector and capital markets.

Trade Minister Mari Elka Pangestu said the new Investment Law -- which she expected to be passed within next year's first semester -- would be particularly important in spurring more investment, and supporting the Economic Partnership Agreement (EPA) that Indonesia recently signed with Japan.

The EPA will exempt 90 percent of Indonesian export products to Japan -- including textiles and footwear -- from tariffs, while 30 percent of Japanese products, particularly those related to support industries, such as the steel and automotive component industries, would likewise be exempted from tariffs.

Finance Minister Sri Mulyani, meanwhile, said the government was currently revising the classification of primary agricultural products to be exempted from value-added tax (VAT) -- which the food industry has been lobbying for, in particular.

Still, the problem regarding the efforts to improve investment lies in implementing and monitoring the policies, rather than merely putting them on the books.

"The macroeconomy may be better, but the microeconomy is still in a shambles," Kadin chairman M.S. Hidayat said. "The government still has a lot to do in actually addressing problems in the real sector if we are to get more growth."

Among the most worrisome problems, Hidayat noted, was the rampant practice of businesses being required to pay illegal fees to obtain the permits and licenses needed to operate.

Red tape at the local level is now one of the major factors hampering investment, as well as a lack of legal certainty and poor infrastructure.



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