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)