Mon, 02 Apr 2007
From: The Jakarta Post
By Andi Haswidi, The Jakarta Post, Jakarta
Despite the enactment of the Investment Law last week, business players continue to reserve their enthusiasm, maintaining that it is far from enough to improve the country's investment climate.

"The new law gives legal certainty for business, especially on the land-use rights issue. However, the law is not the sole panacea to improve the investment climate," Indonesian Chamber of Commerce (Kadin) chair Mohammad Sulaiman Hidayat told The Jakarta Post on Sunday.

He said the extension of cultivation rights from a maximum of 60 years to 95 years would provide significant stability for long-term investments.

"Malaysia and Singapore also offer land-use rights above 75 years. I think what we have now is comparable to our competitors."

Hidayat said the new tax incentive schemes offered by the law would also encourage more investment for big and small players alike. "In terms of creating a balance between small and big players, the law is able to do that."

He was quick to add, however, that the law was only the first step in moving toward a better investment climate. He stressed that it must be accompanied by revisions to the current tax law and labor laws to ensure climate improvements.

Last week, the House reached a deadlock in deliberating the tax bill and postponed further discussion until the recess period ends next month.

The ongoing debate on the revision to the labor law among representatives from the government, business players and labor unions is also still far from reaching a breakthrough.

"Of the three, the labor law is the most crucial to improve investment. After talking with the government, I don't see the law can be concluded this year."

If the revision is not concluded this year, Hidayat warned, then it would also be difficult to do so next year, as political parties and legislators would be focused on the 2009 election.

"After all, laborers are also their constituents," he said.

Indonesian Employers Association (Apindo) chairman Sofyan Wanandi and Indonesia Australia Business Council (IABC) president Noke Kiroyan also said the new investment law would not amount to much without revisions to tax and labor laws.

"The new law is definitely better than the old one. It gives equal treatment to both local and foreign investors. But that is not enough. We need to conclude the revisions of tax and labor laws so that investments can actually come in," Sofyan said.

"A law can be excellent. However, implementation is more important, especially at the local government level. This is what concerns foreign investors the most," he added.

"It is of course a benefit for us to have the new law. However, tax and labor reform is far more important," Noke said.

Investment Law Features:

-- Provides legal grounds for equal treatment of local and foreign investors, competitive investment incentives, government support for SMEs, longer land use rights, a two year permit for foreign investors that can be extended into a permanent stay and special economic zones

-- Investors eligible to receive incentives include those who invest in areas that absorb many workers, are involved in the government's infrastructure projects, promote the transfer of technology, invest in pioneering industries, invest in rural areas, are involved in science research and innovation, partner with SMEs, use local production capital and invest in environmentally friendly projects.

-- It elevates the hierarchy of the Investment Coordinating Board (BKPM), which is now serving under the management of the Trade Ministry, to become a non-departmental government institution that reports directly to the President.



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