Mon, 26 Oct 2015

The European Business Chamber of Commerce in Indonesia (EuroCham) has just released its position papers for 2013 highlighting its review of investment conditions in Indonesia for that year. The position papers include criticism of some of Indonesia’s investment polices and further provide recommendation for their improvement. .

“The recommendations in the position papers show the perspective from European businesses on issues related to the trade and investment climate in Indonesia,” said Jakob Friis Sorensen, EuroCham Chairman, in Jakarta last Thursday.

In the position papers, EuroCham asserts that Indonesia must improve many matters if it wants to create a sound trade and investment climate. The three most highlighted items are the revision of the Negative Investment List (Daftar Negatif Investasi – DNI), investment application process at the Indonesian Investment Coordinating Board (Badan Koordinasi Penanaman Modal – BKPM), and tax holidays.

Regarding the DNI revision, Jakob said that EuroCham is concerned about the delay and uncertainty of its publication. Even though the Government has discussed the DNI many times, there is still no clarity as to when the new DNI will be issued. Most potential investors, said Jakob, are worried about this issue.

On the matter of investment applications at the BKPM, Jakob emphasized timeframe problems in applying for investment licenses and approvals. The BKPM has declared its commitment to issuing approvals within a maximum of two days after a completed application is received. In practice, however, this commitment is rarely honored.

“Sometimes it takes 1-2 weeks,” notes Jakob.

EuroCham recommends that the BKPM monitor the implementation of this commitment. Jakob asserts that if used effectively the current online application tracking system at the BKPM should be able to provide for the realization of the two-day timeframe.

Finally, in regard to tax holidays, Jakob said that the Government’s commitment to implementing this policy is questionable. Jakob admitted that some regulations state that business may only secure a recommendation from the BKPM to obtain a tax holiday from the Directorate General of Tax. In practice, however, the Directorate General of Tax still asks for recommendations from other related and technical ministries.

To resolve this problem, EuroCham recommends the BKPM and Directorate General of Tax establish standardized criteria for acquiring tax holidays. This approach could be used to anticipate further changes in ministerial regulations for the requirements under which tax holidays are granted.

EuroCham further recommends that the two institutions create a task force to evaluate applications for tax holidays. Using this approach, businesses would not have to secure recommendations from other ministries.

“This task force could simplify the application process and reduce the timeframes for investment applications,” said Jakob.

In response to EuroCham’s position papers, Guyub Sagotrah Wiroso, Director of International Business Cooperation at the BKPM, said that at this time he could not comment as his institution had not yet received a copy of the position papers.

“The position papers must be submitted to us before we make further comments,” concluded Guyub.