Govt announces sweeping reforms to lure investors

Govt announces sweeping reforms to lure investors

JAKARTA (JP): The government will introduce massive reform of
investment procedures in a bid to encourage domestic investors
and lure back the foreign capital badly needed to restore the
country's ailing economy, a senior minister announced yesterday.

Coordinating Minister for Economy, Finance and Industry
Ginandjar Kartasasmita said the measures would simplify licensing
procedures significantly and improve transparency in the system.

With the changes, applications for investments of up to US$100
million will only require approval from the State Minister of
Investment, he said.

"Up until now, foreign investment applications of only
$100,000 required a presidential permit," Ginandjar said after
meeting President B.J. Habibie in the Bina Graha presidential
office along with State Minister of Investment Hamzah Haz.

Investors in the industrial sector will also be given freedom
to choose factory sites, unlike in the past where they were
forced to choose sites owned by certain powerful companies, he
added.

Hamzah, a former legislator from the United Development Party
(PPP), said growth in investments had dropped sharply this year
following political and economic upheaval in the country.

"Compared to (investment growth) in 1997 the situation is very
severe. As I recall, the value of investments in May was only
$200 million compared to $900 million for the same month last
year," Hamzah, who is also chairman of the Investment
Coordinating Board (BKPM), noted.

"These are highly significant reforms which have been drafted
in only four days. Previously such changes would have taken
months, if not years, to process," Ginandjar pointed out.

The heads of provincial investment coordinating offices will
now be authorized to approve domestic investment applications for
sums of less than Rp 10 billion ($100,000).

"Only when the value is over that threshold does it need
approval from Jakarta," Hamzah said, adding that regents and
mayors would also be authorized to process all the administrative
requirements for both domestic and foreign investments under the
proposed changes.

However, when asked when the new policies would take effect,
Ginandjar replied: "As soon as possible, when the President has
issued a decree."

This month's riots forced foreign and domestic companies to
halt or reduce production and foreign workers fled the country.

The International Monetary Fund (IMF) Asia-Pacific Director
Hubert Neiss pointed out emphatically that political stability
was the key to enticing domestic and foreign investors back into
the market.

After meeting Habibie on Wednesday, former minister of finance
Frans Seda said that foreign investors would not return to
Indonesia until Habibie held general elections to obtain a
presidential mandate of his own.

Hamzah said the government would grant tax exemptions to
certain industries, especially those manufacturing products with
a high local content.

"We will make (the regulations) very transparent," the
minister added.

He said the government would not revoke tax exemptions which
former president Soeharto granted to six companies in August last
year.

The six companies are PT Polysindo Eka Perkasa and PT Texmaco
Perkasa Engineering, the two listed wings of textile producer
Texmaco Group; PT Smelting Copper Co.; PT Trans Pacific
Petrochemical Indotama; PT Seagate Technology Sumatra; and PT
Kiani Kertas, a giant pulp and paper producer controlled by
former minister of trade and industry Mohammad "Bob" Hasan and
partly owned by foundations chaired by Soeharto.

"The six companies are okay, the matter is in the past. In the
future we will make the award of such tax breaks much more
transparent," Hamzah said.

The new minister also promised to help companies damaged or
looted during recent riots to resume business activities or sell
their assets and shares to other firms. (prb)