Give us a just system<\/p>\n
The decrease of almost 60 percent in foreign direct investment
\napprovals and 30 percent in licensed domestic investment projects
\nin the first five months of this year provide further evidence of
\nthe worsening disadvantages of doing business in Indonesia.<\/p>\n
Trade figures, as reported by the Central Bureau of Statistics
\n(BPS) early last month, also showed how investment has been
\nslackening to almost a negligible level, as reflected by the 26
\npercent decline in imports, which usually consist largely (more
\nthan 80 percent) of industrial basic materials and capital goods,
\nin the first four months of the year.<\/p>\n
The US$1.67 billion in foreign investment and Rp 9.4 trillion
\n($1.05 billion) in domestic investment licensed by the Investment
\nCoordinating Board (BKPM) in the January-May period look even
\nmore insignificant because realized investment is usually less
\nthan 40 percent of the approved foreign investment and below 50
\npercent of licensed domestic investment.<\/p>\n
This small capital inflow became even more negligible,
\ncompared to the billions of dollars still fleeing the country
\nevery year, either through debt payments, profit repatriation and
\ncapital flight to safety.<\/p>\n
This development is quite worrisome as it takes place at a
\ntime when the country, suffering from a steeply falling rate of
\ndomestic savings due to depressed economy, is desperate for
\nforeign investment to fuel economic recovery. Private capital
\noutlays are badly needed to increase the economic capacity as
\nprivate consumption, the main locomotive of growth over the last
\ntwo years, has begun to lose steam, and the government,
\noverburdened with huge domestic and foreign debts, is deprived of
\nmeaningful investment capacity.<\/p>\n
The increasingly stable political condition, strengthening
\nrupiah, weakening inflationary pressures and declining interest
\nrates are ineffective to prompt Indonesians to repatriate the
\ncapital they moved overseas during the peak of the economic and
\npolitical crisis in 1998, let alone to attract foreign investors.<\/p>\n
BKPM chairman, Theo Toemion, was right in observing last week
\nthat a worsening legal uncertainty is now enemy number one to
\ninvestors. Yet similarly damaging is the regulatory uncertainty
\narising in the start-up implementation of regional autonomy.<\/p>\n
The legal limbo, caused by incompetent and corrupt courts,
\nshows how the judicial system that was designed to support the
\nauthoritarian and corrupt administration under Soeharto, remains
\nuntouched by the reform movement.<\/p>\n
The legal uncertainty makes investing in Indonesia like
\ngambling in a casino because in a highly-complex market economy,
\ninterdependent and contingent world economy, it is good legal
\ninstitutions and laws that serve as risk management tools.<\/p>\n
Effective laws create structures of expectations that guide
\nofficial behavior in making decisions, particularly economic
\ndecisions, by allowing people to make predictions reasonably
\naccurate within an acceptable range. Legal certainty empowers
\nofficials and the people to manage the contingencies and risks of
\ncomplexity within a market economy. Put another way, effective
\nlaw enforcement enables businesspeople to reasonably calculate
\nrisks.<\/p>\n
Worse still, regulatory uncertainty that arose in the
\nlaunching of regional autonomy has discouraged investors from
\ndoing business in most provinces outside Java where most of the
\ncountry's natural resources are located.<\/p>\n
Legal and regulatory uncertainty makes the country's rich
\nnatural resources, low labor wage structure and potentially large
\nmarket -- supposed to be the main attractions to investors --
\nvirtually meaningless for business proposition.<\/p>\n
It is therefore most imperative that the government act
\nimmediately and firmly to reform the judicial system. True, the
\ndevelopment of a full-fledged rule-of-law based system takes a
\nlong time as it involves changing many minds, systems, ways of
\nbeing and doing, education and retooling on a grand scale.<\/p>\n
However, given the urgency of the problem, we cannot afford an
\nincremental reform. A sort of shock-therapy approach, beside a
\ngradual reform, is needed to build a minimum confidence in the
\ncourt system.<\/p>\n
We suggest therefore that the government select a pool of
\nhighly competent and honest judges and prosecutors and assign
\nthem to courts in Jakarta and several other major cities that
\nhandle high-profile criminal and civil cases.<\/p>\n
Widely-perceived justice dispensed by courts in several big
\ncriminal and civil (commercial) cases would inspire confidence in
\nthe court system. The jailing of several big corruptors and
\nrecalcitrant big debtors or the bankrupting of some bad
\nconglomerates could go a long way toward convincing people that
\nthe supremacy of law is still the rule and not the privilege of
\nthose with political or money power.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/give-us-a-just-system-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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