Canceled investment<\/p>\n
The latest data on investment projects released by the
\nInvestment Coordinating Board at a coordinating conference last
\nWednesday, besides indicating a steady increase in new investment
\napprovals, contained a disturbing trend. Foreign investment
\nprojects canceled by the board in the first six months of this
\nyear increased by 212.5 percent in terms of projects and by
\nalmost 1,500 percent in terms of value, compared to the same
\nperiod last year.<\/p>\n
It was regrettable therefore, that the board's chairman,
\nSanyoto Sastrowardoyo, canceled a news conference originally
\nplanned for after the meeting. Sanyoto did not explain the reason
\nfor the last-minute cancellation. Hopefully it was not his lack
\nof knowledge of the details of the canceled projects but simply a
\nlast-minute call to a more urgent appointment.<\/p>\n
We nonetheless see it as rather strange that the chief
\ninvestment administrator could not have found the time to explain
\nso worrisome a trend in the investment sector. So drastic an
\nincrease in the value of investment projects canceled -- the
\nfigure is US$458.5 million for January to July 1996 -- requires
\nthorough public examination. By the board's rules the canceled
\nprojects were probably licensed before June 1993 as investors are
\ngranted three years in which to start realizing their projects
\nbefore the board can move to annul their investment licenses.<\/p>\n
A thorough investigation would have told the board much about
\nwhy the investors had not started their projects after spending
\nvast amounts of time and money on feasibility studies and
\nprocessing the many licensing requirements. If the main reason
\nfor the cancellations was internal corporate problems such as
\ndifficulties in arranging investment credits then the board
\ncannot be blamed. However, if the main reasons were related to
\nregulatory requirements, they would be valuable inputs for the
\nboard and other government agencies when considering how to
\nfurther improve the investment climate.<\/p>\n
The problem is that even though the board has significantly
\nimproved its services, it has yet to function fully as a one-stop
\nlicensing office for investment ventures as it has been supposed
\nto do since the overall realignment of investment licensing
\nprocedures in 1978. True, coordination is difficult and,
\nsometimes, a delicate problem within the government bureaucracy
\nin developing countries, but in Indonesia it is often the biggest
\nhurdle and needs to be addressed.<\/p>\n
The problem has further been exacerbated by the fact that the
\ncompetence and authority of the Provincial Investment
\nCoordinating Boards are often extremely poor. These are supposed
\nto be the one-stop administration centers for the processing of
\nlocal permits related to location, building, land acquisition,
\nprevention of public nuisance and several other licenses but are
\noften anything but a one-stop service center. This is partly
\ncaused by many governors' lack of awareness of the benefits of
\nattracting direct investment to their provinces, due to the
\ncountry's too centralized administration. They rarely feel any
\nneed to compete for such ventures and usually focus on securing
\ngovernment projects. There have been many cases whereby
\ninvestment projects which had been licensed by the national board
\n(BKPM) failed to be implemented because of lengthy delays
\nencountered in obtaining local permits.<\/p>\n
The central government has realized the need to streamline
\nlicensing procedures in the provinces but has been very slow to
\nimprove things by decentralizing its authority.<\/p>\n
The large amount of licensed investments canceled during the
\nfirst semester should give a stronger message to the government
\nthat much needs to be improved in order to attract investment to
\nthe country. The government should no longer be misled by the
\nperception that the country's huge potential market and abundant
\nnatural and human resources will by themselves woo investors.<\/p>\n
The government should instead realize that within the next
\nseven years the domestic market in Indonesia will turn into an
\nASEAN market when the region becomes a free trade area in 2003.
\nThat means new investors planning to operate in Indonesia will
\ntake into account competition from other ASEAN countries when
\nmaking their production calculations.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/canceled-investment-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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