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.