BKPM to maintain divestment policy

JAKARTA (JP): The government will maintain its divestment policy despite criticism from foreign investors and growing regional competition, says an official of the Investment Coordinating Board (BKPM).

"The government will maintain the divestment rule because it is bound to do so by the Guidelines on State Policy (GBHN)," Sugihono Kadarisman, deputy chairman of BKPM, told The Jakarta Post during a seminar on joint ventures here yesterday.

The Guidelines on State Policy, set every five years, are virtually impossible to alter. The next policy package will go into effect in April of 1999.

The government's deregulation package of October 1993 limits foreign ownership in direct investment or joint venture projects with equity of between US$1 million and $50 million, to 80 percent. Within a 20-year period after commercial production, foreign investors must divest until the ownership composition is at least 51 percent in favor of their domestic partners.

Although the October 1993 package allows initial 100 percent foreign ownership with capital above $50 million, the divestment regulations remain the same.

Indonesia is the only Pacific Rim country with this policy. Some analysts and investors say it makes Indonesia a less attractive option.

"We have heard complaints from investors about the divestment policy," Sugihono said. "However, we are not going to dismantle it in the near future."

"The government cannot change the GBHN, which is the foundation of the divestment policy," he added.

BKPM statistics show that foreign investment in Indonesia went into a tailspin last year. They reveal that Japan, Indonesia's largest investor, put in almost 50 percent less in 1993 than it did in 1992. Japanese investment dived from $1.5 billion to $815 million last year.

Overall, foreign investments fell by 21 percent from $10.32 billion in 1992 to just over $8 billion last year.

Deregulation

Sugihono also stated that the government will release more comprehensive deregulatory measures later this year.

He did not specify the exact time of the issuance of the new packages nor indicate which sectors the new policies will cover.

"Maybe in June," he said when confronted with rumors about the time of issuance.

The new packages, however, will be more "business-oriented," he said.

Sugihono said BKPM will always try to "accommodate" business interests "as much as possible". (04)