Wooing foreign investors<\/p>\n
The deregulation of foreign investment, as announced on Thursday, is
\nperhaps the most liberal measure ever taken regarding the treatment of
\nforeign investors.<\/p>\n
Though most businessmen had expected a more comprehensive reform
\npackage that would also cover manufacturing and trade, the single
\nderegulation measure contained in Government Regulation No.20\/1994 is
\ncertainly a boon to foreign investors. The new policy opens many
\nbusinesses previously shut off to foreign investors, such as civil
\naviation, sea transport, production of potable water, mass media and
\nrailways transport.<\/p>\n
The move addressed most of the complaints often raised by foreign
\nbusinessmen and provides investors with a strong sense of long-term
\nsecurity.<\/p>\n
The previous policy instrument of October, 1993, as stipulated in
\nGovernment Regulation No.50\/1993, did offer additional incentives to
\nforeign investors. However these incentives were tied to many
\nconditions. For example, a wholly-owned foreign enterprise is allowed
\nbut only when it is set up in the least developed eastern areas of the
\ncountry or its paid-up capital amounts at least to $50 million. The
\ndivestment rulings also were seen by most foreign businessmen as too
\nstringent, especially in view of the limited alternative ways for
\ndivestment.<\/p>\n
Moreover, businessmen wondered how harsh requirements, such as the
\nminimum paid-up capital of $50 million, had been determined and what
\ntheir real objective was. Why 20 years were set as the target period
\nduring which foreign investment ventures, irrespective of their business
\nareas, should be majority owned by Indonesian interests. This\" go-and
\nstop\" policy seemed to make the bottom line of the 1993 deregulation
\nmove, in so far as foreign investment was concerned, very negative.<\/p>\n
The government has apparently realized those shortcomings. Moreover,
\nthe urgency of further deregulation has been brought home by the marked
\ndecline in new foreign investment commitments last year. As most
\ncountries have now pursued the market-economy principle and adopted
\nvigorous pro-business policies, the competition for international
\ncapital has also become much fiercer. Further down the line, as
\nIndonesian labor costs are on the rise along with the progress of the
\npublic welfare, the country can no longer rely too much on the
\nlow labor costs as one of its competitive advantages. Hence, there
\nshould be additional incentives to make Indonesia attractive to foreign
\ninvestors.<\/p>\n
Despite all the seemingly attractive incentives offered by the new
\npolicy, a note of caution is still in order. Given past experience, we
\ncan assume that the announcement of deregulation is simply the start of
\na long and arduous process that will require good coordination among the
\nvarious government agencies. The deregulation, for example, has yet to
\nbe translated into technical guidelines. Drawing these guidelines will
\nnot be an easy task, especially after such public services or utilities
\nas civil aviation, sea transportation, railways, mass media and drinking
\nwater are now open to foreign investors. Extra care is needed because
\nthe government should see to it that the entry of foreign ventures into
\nthese areas will not harm the public interests.<\/p>\n
But all in all, the latest deregulation move should be welcomed
\nbecause it gives the right signal to the business community -- that the
\ngovernment is consistent in its pro-business policy and determined to
\nsimplify rulings for the business sector.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/wooing-foreign-investors-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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