Govt told to remedy legal uncertainties

Govt told to remedy legal uncertainties

Fabiola Desy Unidjaja and Rendi A. Witular, The Jakarta Post, Jakarta

Despite assurances from the President, Vice President and other
top government officials that their money was safe here, some
investors at the Infrastructure Summit on Tuesday remained
concerned whether the reform commitments could be translated into
action by the country's weak bureaucracy.

Meanwhile, AFP reported that the World Bank, the Asian
Development Bank and Japan have agreed to provide up to US$5
billion worth of loans as a catalyst for other investors to
invest in Indonesia's power sector, roads and other
infrastructure facilities.

The concerns of foreign investors are primarily centered on
two long-running issues: legal uncertainty and rampant
corruption.

"We have been operating here for more than eight years.
Through that period we have learned that legal uncertainty has
become the main problem for the business community," Philippe
Louis-Dreyfus, president of French trading, property and shipping
group Louis-Dreyfus Armateurs, said on Tuesday at the end of the
two-day summit.

He said legal certainty was crucial to investors because
investment in the infrastructure sector was a long-term
investment involving a huge amount of money, and investors would
need at least 10 years before they could start enjoying a return
on their investment.

The chairman of Singapore Power, Ng Kee Choe, agreed. "We are
afraid that investment in Indonesia may run aground as there is a
huge possibility of legal disputes either with our local partner
or with the government as a result of legal uncertainty."

Japan Sumitomo Corporation chairman Kenji Miyahara said
another area that had to be tackled by the government was the
rampant corruption that contributed to the high cost of doing
business in the country.

"Indonesia will remain uncompetitive compared to other
countries unless it manages to reduce the rampant corruption," he
said.

During the key investment forum, held to attract about US$120
billion worth of investment to develop the country's
infrastructure over the next five years, the government promised
it would move swiftly to fix the weak investment climate here and
provide various incentives for investors through what it called a
"new partnership".

In what may be part of the efforts to ease investor concerns,
the government signed the Jakarta Declaration with
representatives of companies from 20 participating countries in
the summit. The declaration underscores the government's
commitment to remove all bureaucratic hurdles to private sector
investment.

The government promised to finalize all of the required
policies to improve the investment climate, as well as revising
any problematic regulations, within six-months. It also pledged
to honor all contracts made with the private sector.

"We have to make this work otherwise that's it, we will never
be able to do this again," said Vice President Jusuf Kalla at the
summit's closing ceremony, underlining the government's
commitment to the infrastructure projects.

Attended by more than 500 companies from 20 countries around
the world, the government offered some 91 projects valued at
US$22.5 billion during the summit. A second batch of projects
valued at about $57.5 billion will be offered during a summit in
November.

"Under the new government, legal certainty is here and will
remain," said Minister of Justice and Human Rights Hamid
Awaluddin.

"I am aware that my country's bureaucrats need to be improved
and the regulations should be made more investor friendly," said
Coordinating Minister for the Economy Aburizal Bakrie, adding
that a number of investors from several countries had expressed
interest in investing here.

But Deutsche Bank director for Singapore Paul Sempere said
that despite the assurances, there remained questions about
whether the government could realize its promises.

"The intention is always good at the top, but to translate
these intentions into reality in the bureaucracy is another
question," he said.

He said investors would wait until the government was able to
fulfill its commitments on private investment.

"I think the way forward is to use some pilot projects ... a
maximum of two or three pilot projects in each of these sectors,
and push that," he said.

Jakarta Declaration

* Indonesia's Vision for Infrastructure Development

- Government will focus on non-commercially viable projects

_ Government will focus on sectoral reforms to ensure

sustainable private sector participation

- Government will enact program to support greater private sector
involvement in infrastructure

* Removing Bureaucratic Hurdles for Private Investment

- All contractual commitments will be honored

- Develop clearly articulated strategies and sectoral plans

- Invite investors to participate in upcoming fast-track
infrastructure investments

- Issue an interim regulation that addresses the issue of
private participation in infrastructure development

- Issue a regulation that will serve as the basis for private
participation

- Committed to revise law No. 36/1999 on telecommunications

- Develop pragmatic and effective risk management strategies

- Develop local financial and capital markets for infrastructure
financing

- Revise Presidential Decree No. 7 on private participation in
infrastructure development

- Develop action plan for independent tariff setting mechanism

- Strengthen regulatory agencies by providing the necessary
budget and staff