Govt to go all out to attract more FDI

Govt to go all out to attract more FDI

The Jakarta Post, Jakarta

The government is expected to propose a new investment law to the
House of Representatives in December, which would allow foreign
investors to put their money in almost all sectors of the economy
in a move to help boost inward investment.

Investment Coordinating Board (BKPM) chairman Theo Toemion,
however, said on Thursday that foreign investors would still be
banned from entering the defense industry, small and medium-sized
businesses, and sectors related to religion.

"For us, the lifting of the restrictions is crucial for
creating competition. Such competition will then benefit the
public through cheaper products," Theo told reporters.

Currently, foreign investors are prohibited from entering
certain sectors set out on the so-called negative investment
list.

The plan to propose a new investment bill in December is in
line with the government's post-IMF economic reform program as
described in the recent White Paper. According to this document,
the government will revise the existing negative investment list.

The media sector, including both the electronic and print
media, would be among the sectors affected by the move, Theo
said.

Currently, foreign ownership of media companies is prohibited.

The new investment law will replace the existing 1967
investment law.

Besides opening up new sectors to investment, Theo also said
that the new investment law would contain measures to minimize
the obstacles facing foreign investors, such as excessive red
tape.

He did not go into detail, however.

The new bill is expected to help boost foreign direct
investment (FDI), a crucial element to allow the country push
economic growth higher beyond the meager growth rate of 3 percent
to 4 percent posted over the past couple of years.

The government has been under pressure to boost economic
growth to pre-crisis levels of between 6 percent and 7 percent to
help create more jobs for the millions of unemployed and job
seekers entering the market each year.

Indeed, one of the main goals of the post-IMF reform program
is too boost investment.

Legal uncertainty, security fears, labor disputes and poorly
managed decentralization are among a few of the problems that
have put a brake on investment.

Investment approvals have been in decline since the country
was hit by the economic crisis. In 2002, FDI approvals plummeted
by 35 percent, while domestic investment approvals dropped by 57
percent.

Before the crisis, investment was one of the country's main
economic growth engines.

But nowadays it only accounts for less than 15 percent of the
growth in the country's gross domestic product (GDP), with
consumption contributing more than 75 percent.

Analysts have long called for comprehensive and coordinated
action to address the problems, saying that Indonesia has no
choice but to attract investment -- especially foreign investment
-- if it wants its economy to expand by more than the current
modest levels of around 3 percent to 4 percent.

List of businesses closed to non-state investment

1. Marine and fishing sector

1.1. Harvesting/processing of sponges

2. Industrial and trading sector

2.1. The production of chemicals harmful to the environment

2.2. The production of chemicals such as sarin, soman, halon, etc

2.3. The production of armaments and armaments components

2.4. The production of cyclamate and saccharine

2.5. The production of alcoholic drinks

2.6. Casino and gambling facilities

3. Communications sector

3.1. Air traffic systems providers

3.2 Management and operation of radio frequencies

4. Mines and energy sector

4.1. Mining of radioactive minerals

List of businesses closed to foreign investment

1. Forestry and plantation sector

1.1. Germ plasm cultivation

1.2. Concessions for natural forests

1.3. Contractors in the lumbering field

2. Communications sector

2.1. Taxi/bus transportation services

2.2. Small-scale shipping operations

3. Trading sector

3.1. Trading in support services

4. Information sector

4.1. Radio and television, multimedia and print media

4.2. Motion picture production