`Court abuses hamper investment'

`Court abuses hamper investment'

Mark Drajem, Bloomberg, Washington

The Indonesian government needs to rein in the abuses of its courts, army and police if the Southeast Asian nation is going to attract foreign investment, a U.S. State Department official said.

Matt Daley, the department's top official for East Asia, urged the government to improve both security and justice to counter the economic fallout from last month's terrorist bombing in Bali. The U.S. estimates the bombing will shave as much as 1.5 percentage points off of the country's growth rate this year.

"Indonesia is still a dangerous place for Americans and others and will likely remain so for some time," Daley told a meeting of the United States-Indonesia Society. Still, after the attack, "the government has more room to maneuver than it may have realized."

Because of the continuing threat, the State Department has no plans to remove a warning that Americans avoid Indonesia because of the threat of additional attacks.

Daley's warning underlines U.S. concern about the world's most-populous Muslim nation. Many analysts blame Indonesia for failing to take terrorist threats seriously before the Bali bombing, which killed more than 190 people and injured 300.

Most of those people injured in the Bali attack were Australians and Balinese workers. Indonesia has conducted a "very thorough" investigation of the attack and of the links of the group alleged to be responsible -- Jamaah Islamiyah -- to the al- Qaeda organization, according to the State Department.

The U.S. is also pressing Indonesian President Megawati Soekarnoputri to do more to curb human rights abuses by the military and to make sure the courts are functioning as they should.

The Indonesian courts are a "non-transparent legal maze," Daley said. Investors want "the government to demonstrate it understands the gravity of the problem."

Clear and orderly courts are essential to attract investors, according to the World Bank. And the government has made attracting investment one of its top priorities. Indonesia needs to accelerate state-asset sales in order to cover a widening budget deficit.

Just two weeks after the Bali attacks it hosted potential investors at a Bali resort in an effort to lure them to bid on some of the $3.9 billion worth of asset sales planned this year.

If the Indonesian courts worked better, then human rights groups might not try to use American courts to try to link U.S. companies to abuses by the Indonesian military or police, he said.

In July the State Department urged a federal judge to dismiss a lawsuit against Exxon Mobil Corp. over its operations in Indonesia, saying the suit may harm the U.S.-led war on terrorism and U.S. regional interests.

The suit, on behalf of 11 Indonesian villagers, claims that company-paid security forces committed murder, torture and rape in Aceh province where the company operates a government-owned oil field. The company has denied the allegations.

"We continue to work for legal reform in Indonesia," Daley said. "We are pushing for accountability for human rights abuses by the (army) and others."