Deregulatory measure on investment subject to revision

JAKARTA (JP): A senior investment official, bombarded with criticism over a new deregulatory measure which allows foreign investors to construct and operate infrastructure facilities, said yesterday that the ruling is not final and can be reviewed.

"Don't worry too much because the deregulation can be revised," R.T. Napitupulu, deputy chairman of the Investment Coordinating Board (BKPM), told the participants of a seminar on political economy.

Businessman Probosutedjo, a speaker at the meeting organized by the Center for Information and Development Studies (CIDES), said that the deregulatory measure, which is stipulated under Government Regulation No. 20/1994, or PP 20, is unconstitutional because it allows foreigners to control facilities for the public interest.

Sri-Edi Swasono, chairman of the Indonesian Cooperatives Council, told the meeting that PP 20 represents a divergence from our economic philosophy which does not believe in an all-out free-market economy.

The government in March issued the decree, which significantly eased restrictions on foreign investors, freeing them from the minimum capital requirements and ending compulsory equity divestment for joint ventures. It also allows both domestic and foreign investors to operate infrastructure facilities, including seaports, telecommunications, power plants, railway facilities, civil aviation, nuclear power and mass media.

Reaction

The ruling, aimed mainly at wooing foreign investment, won immediate support from foreign investors but drew mixed reactions from local businessmen, leaders of cooperatives, legislators and media executives.

According to BKPM, foreign investments approved by the government in 1993 declined to US$8 billion from $10 billion in 1994. During the first 7.5 months of this year, BKPM approved foreign investment commitments of $15.97 billion.

Probosutedjo, who is also a half brother of President Soeharto, said that the government should adopt other ways of looking for investments for development.

State Minister of Investment/Chairman of BKPM Sanyoto Sastrowardoyo said that a total investment of Rp 660 trillion (US$300 billion) is needed in the coming five years to maintain the economy's annual average growth of 6.2 percent. Out of the investments, 73.3 percent is expected to come from the private sector.

Probosutedjo said the government, for example, could increase the tax rate on luxury goods.

He also said that the government should not necessarily invite foreign investors to operate businesses of public interest in order to encourage state companies to increase efficiency.

Efficiency of state firms can be increased through improvement of management, he said.(hdj)