BKPM seeks to centralize investment licensing

Attracting foreign investors to kick start an ailing economy is utmost and foremost in the mind of our government officials these days, and the burden lies with the Investment Coordinating Board (BKPM). The regional autonomy law, however, giving more authority to regional administrations, seems to be at odds with the board's intention to become an umbrella body for investors. The Jakarta Post's Tantri Yuliandini and Johannes Simbolon interviewed BKPN chairman Theo F. Toemion.

Question: We are interested in hearing your views on the functions of BKPM, especially in light of the regional autonomy law.

Answer: BKPM is at a crossroads right now. As you know, as a consequence of the regional autonomy law, regional administrations can now issue licenses (related to investment purposes). We now realize that we need to revoke this authority.

At the moment, we all know that the regional autonomy law is being revised and I have written a letter to the Minister of Home Affairs for those rights to be centralized again.

The reason is clear: we want those rights to be centralized to ensure a balance between the industrial sectors and between regions. This is needed for a mapping of our investment so we know which areas still need encouraging and extra incentives.

If we look at incentives, whether fiscal or non-fiscal, such as lower import tariffs and tax holidays, they are still far from being decentralized.

So, I believe the time is not yet right for our national investment policy to be transferred to regional administrations.

Q: Does this mean the regional investment boards will be disbanded, or will they function as the extended arm of the central BKPM?

A: We used to have regional offices, called the BKPMD, which since the imposition of the regional autonomy law have become investment services offices, reporting directly to the governor.

We hope that with the revised autonomy law, the offices' functions will be redirected back to the central government so the regional offices have to coordinate with the central office to issue licenses.

What we need to remember is that the country badly needs investment. With the state of the country's economy, our banking industry not yet fully functional and a swamped private sector, there is no other option than to attract investment. For that, sacrifices have to be made.

We must prevent situations from developing, as they have now, where the regional administrations issue regulations to earn money that inhibit the growth of investment that they need.

Q: How do you coordinate licensing procedures with the different regions when each region may have a different set of regulations?

A: That's just the point. There shouldn't be any difference. As I said, the country badly needs new investment. So each region should have the same perceptions.

The policy will be at the level of the central government. The regional administrations must understand this and they must support it because, in the end, it is the regions that benefit.

In the meantime, the regions could suggest to the central government how to best attract investors because they know their own area. We give incentives for regions that need them. I am sure the regions will be grateful in the end.

Q: What steps have you taken to reclaim the rights of BKPM in issuing licenses for investment?

A: We have written to the Minister of Home Affairs and in the preliminary meeting I think it has been agreed that the rights should be reclaimed from the regional administrations.

In time, the proposal will go to the House of Representatives. We have discussed this with the House's Commission V for industry and trade affairs and they are very supportive of our efforts here at BKPM.

The commission has also agreed to support the proposal when revisions to the regional autonomy law reach the House for deliberation.

Q: Have you calculated the resistance that this proposal will create?

A: People are likely to be reluctant (to give us back these rights). BKPM's function is not limited to issuing licenses though, it covers promotion also. In this case, the regional administrations are the ones who know their own areas best, their strengths and the wealth of natural resources. They are free to promote their area for investment.

From the letters I receive from regional administrations, basically all they want is clarification. I think they also realize that we are not blocking investors from entering their regions.

As I've said, to be able to achieve balanced and significant growth between regions, we need to know which areas need more incentives and, in terms of incentives, these are still in the hands of the government.

Q: Will this right be permanent or phased out to gradually give more authority to regions?

A: Later on, regions will be rated based on how attractive they are for investment. There will be an assessment body to rate them and, so, each administration should compete to make its region the most attractive for investment. When they reach a certain stage they will be given more authority over investment. So, if they want more authority, they should also ensure that the climate is conducive for investment in their areas.

In time, the central government will only provide easy licensing procedures and, if the investor wants to go to the region, the regional administration will help them.

Q: How will BKPM do its job when many regulations involved with investment are not under BKPM's authority?

A: As you know, BKPM has been without a chairman for a long time and people think BKPM is redundant, which is understandable, because more focus was on the state-owned enterprises. And even much of our authority has been stripped away by technical ministries, such as licenses for workforce, tax incentives, etcetera.

I believe that by putting me in charge of this office, the government is committed to reinstating the functions of BKPM. That's why I have been busy restoring the internal structure of the office, workers who have long been demoralized without a leader, reclaiming our initial functions, including drafting a new law on investment and consolidating our function as an investment coordinating body.

It's difficult if BKPM issues a license and it is then overruled by regulations from other ministries. We hope that with the new law all of this will be clarified and our position and functions ensured. BKPM will overrule other ministries' regulations and bureaucracy to ensure easy and fast procedures for investors. That's why a strong leader is needed. It helps that I have experience as a member of the House.