Facilitating investment, who is responsible?

Facilitating investment, who is responsible?

Riyadi Suparno, The Jakarta Post/Jakarta

Many people had all but forgotten about the Investment
Coordinating Board (BKPM), which used to play a major role in
attracting and facilitating foreign investment in the country.

It was only the recent fiasco at the Jakarta International
School (JIS), where the then chairman of the board reportedly
assaulted a number of expatriates during a children's basketball
game, that reminded us about this institution.

The incident is truly lamentable. An ongoing police
investigation could lead to assault charges against the former
BKPM chairman, Theo F. Toemion, whose supporters demonstrated in
front of the U.S. Embassy in Jakarta on Friday.

Yet, the incident may also have the positive result of
promoting the government to take action. How could a man whose
job was to attract foreign investors allegedly attack foreigners?
Following the incident, the government quickly appointed a new
BKPM chairman, businessman Muhammad Luthfi.

The government has claimed the replacement of Theo was in the
works for at least three months because of his poor performance.
But the timing of the replacement following the incident at JIS
is not a coincidence.

Looking back at Theo and the BKPM, Theo was the only
"outsider" in President Susilo Bambang Yudhoyono's circle of
aides. Thus, it was well understood that it was only a matter of
time before Theo was shown the exit.

The BKPM itself never had any prominence in the eyes of
Susilo. But Susilo alone cannot be blamed -- if he is to be
blamed at all -- for the declining role of the board.

In fact, the BKPM never really appealed to any president after
B.J. Habibie, who included the BKPM chairman in his Cabinet as a
state minister for investment -- just as his mentor Soeharto did.

Since Habibie, BKPM's star has been dimming. Many people are
responsible for this, including the BKPM itself which was unable
to sell its importance.

The BKPM can surely blame the economic crisis for its
declining importance. The flow of foreign direct investment
suddenly became negative after the crisis -- meaning the country
had more investment outflow than inflow. The BKPM suddenly had
less, if anything at all, to do.

Now, with foreign investment beginning to trickle in, the
government plans to strip away some of BKPM's authority. First,
President Susilo will place the BKPM under the Ministry of Trade,
with its chairman still reporting directly to the president.

However, the government would be wise to rethink this plan,
which is illogical. How can someone placed under a minister
report directly to the president?

The BKPM, which was established in 1973, is a coordinating
body, meant to coordinate ministries to help both foreign and
domestic investors realize their investment plans. How can a
coordinating body be placed under a ministry?

In addition, the government plans to strip the board of its
licensing authority. The government -- through Minister of Trade
Mari E. Pangestu -- has said this means investors wanting to do
business in Indonesia will not have to go through the BKPM.
Instead, they will have to go to a nearby public notary, which
will then process the necessary licensing requirements at the
relevant ministries.

This plan also has serious problems. Who can guarantee that
the relevant ministries will not charge exorbitant fees or
prolong the time for processing licenses? Unless there is a
statutory guarantee that all government offices will issue
necessary permits within a set time frame, it will create more
red tape and become more costly for investors.

If the government goes ahead with its plan to remove the
BKPM's licensing authority, there is no point keeping the agency
as it is. The government should define the agency's new role and
then change its name accordingly -- or abolish it altogether.

But what about the Regional Investment Coordinating Boards, or
BKPMD, which used to be the local offices of the BKPM? Should
they be retained or abolished? What if local governments still
need them to promote investment in their areas and help investors
interested in bringing money to the areas? All these things need
to be addressed properly.

The alternative is to empower the BKPM and BKPMDs to fulfill
their functions as coordinating bodies providing one-stop service
for investors. To give it more meaning, the strengthening of the
BKPM and the BKPMDs should be pursued through legislation in the
House of Representatives.

If that is the way forward, the government should set a tough
target for the BKPM to meet, for example, giving it a time frame
for investment licensing from an average of over 150 days now to
a maximum of 30 days. All the targets should also be put in the
legislation -- the investment bill that the government has said
is ready to be submitted to the House.

If the government -- and the House -- agrees to empower the
BKPM, it should then take a serious look at the issues of
manpower and budgets. It should consider restocking the board
with people passionate about marketing and, at the same time,
provide them with the budget to promote the country, attract more
investment and take care of existing investors.