Govt 'must act now to up investment'

Leony Aurora, The Jakarta Post, Jakarta

The government should not wait for the House of Representatives to settle their ongoing internal conflict to take measures deemed crucial to revive foreign investment, an economist and a business figure said.

Speaking on Monday at a discussion on next year's investment prospects, noted economist Faisal Basri said the newly installed administration should concentrate on matters that did not need the House's stamp of approval, such as revoking or revising presidential and ministerial decrees that had slowed investment.

"The government can reduce some of the obstacles to investment with (the creation of) short-term programs," he said.

Meanwhile, National Economic Recovery Committee (KPEN) chairman Sofyan Wanandi concurred, saying several decrees that promoted a high-cost economy needed to be revoked.

The discussion was organized by the KPEN, along with the financial journalists club.

"The government cannot change everything with its first 100- day program, but at least it can show a clear indication on what it will do in the future," he said.

Sofyan pointed to a road map for developing industry and investment, drafted by the Indonesian Chamber of Commerce and Industry (Kadin), as reference.

The document, Revitalizing Industry and Investment, suggested a number of bylaws and decrees that needed to be revoked, revised or drafted by the new government.

James van Zorge, a foreign investment consultant, however, reminded the discussion that road maps or new laws and regulations were not the only things needed to attract foreign investment.

"There has to be a change of mind-sets here," he said.

The previous Megawati Soekarnoputri administration operated with certain misinformed mind-sets, namely that Indonesia had abundant resources, great market potential and that the country's economic situation was not so dire.

"Compared with neighboring countries, Indonesia's performance is bad," said van Zorge. The government also needed to keep in mind that the country faced tough competition for foreign investments from other Asian countries, such as India and China.

He further said Indonesia should take better care of its "guests", or foreign investors, citing the recent Newmont case, in which senior foreign executives were imprisoned temporarily under an unsubstantiated charge of polluting the environment.

"They (foreign investors) won't come to invest if they think their executives will be thrown into jail," said van Zorge.

Foreign investment in Indonesia has faltered over the past few years due to various factors, including legal uncertainties, security fears, labor disputes and poor implementation of regional autonomy.

The Investment Coordinating Board (BKPM) reported that foreign investment approvals from January to September 2004 reached US$7.994 billion, up 23 percent from the same period last year. However, net foreign investment at the end of 2003 was negative.

Indonesia has been relying heavily on domestic consumption to fuel economic growth, but analysts have warned repeatedly that consumption alone would not boost growth to exceed 6 percent a year, the minimum needed to accommodate the expanding workforce in the country.

Suggested bylaws/decrees to be revoked, revised or drafted

No. Type Subject Suggested action Reason (if given)

1. Ministerial decree fish-catchment area/equipment revoke --

2. Govt. Regulation No. 40/2001 toll tariffs revise unclear

3. Govt. Regulation No. 82/2001 water quality standards revise higher than other countries

4. Ministerial decree No. 518/KMK06/2003 value-added tax refund revise --

5. Govt. Regulation No. 144/2000 coal as non-taxable material revise --

6. Bylaws levy, tax, regional fees revoke high-cost economy

7. Bylaw/regental decrees traditional law and forest use draft --

8. Govt. Regulations forestry authority revise --

9. Govt. Regulation No. 20/2002 electricity law draft --

10. Industry/trade ministerial decree No. 360/2004 import procedure for raw material for PVC revoke --

11. Industry/trade ministerial decree import criteria for new/used cars revise unclear

12. Presidential decree national tourism body draft --