House urges govt to complete crucial investment bill

Adianto P. Simamora, The Jakarta Post, Jakarta

The House of Representatives urged the government to quickly complete the drafting of the new investment bill to help revive investment flow into the country.

Suryadharma Ali, chairman of House Commission V for industry and trade, expected the government to be able to submit the bill to the House for deliberation before the end of October.

He was speaking during a working meeting with Investment Coordinating Board (BKPM) chairman Theo Toemion. One of the issues raised during the meeting was the fate of the new investment bill, planned by the government seven years ago.

"We are in urgent need of a new investment law to attract more investors to the country," legislator Irmadi Lubis of the Indonesian Democratic Party of Struggle said.

Theo said that his office had completed drafting the bill and had submitted it to the Ministry of Law and Human Rights, but the latter had yet to pass it on to the State Secretariat for final approval before being submitted for deliberation at the House.

He did not know the reason for the delay.

"We submitted the bill to the Ministry of Law and Human Rights on Feb. 17, but so far there has been no decision about it (the draft)," Theo said.

The new investment bill will replace Law No.1/1967 on foreign investment and Law No.6/1968 on domestic investment.

One of the controversial points of the new investment bill is a proposal to provide tax holidays to lure more foreign investment. Although Theo claimed that President Megawati Soekarnoputri supported the plan, Minister of Finance Boediono seems to disagree with the tax holiday policy.

The government abolished tax holidays in 1983 following the enactment of a new tax law, although investors in certain sectors and areas of the country were eligible for a tax allowance facility.

The proposed bill also aims to ensure equal government treatment to foreign and domestic investors.

In addition, BKPM is planning to set up a one-stop services facility to speed up investment licensing procedures and cut the bureaucracy line.

Indonesia needs to attract new investment to help accelerate economic growth. But since the country plunged into a combination of economic and political crisis in the late 1990s, many foreign investors have stayed away from Indonesia.

Lingering uncertainties such as labor conflicts and poor implementation of the autonomy law have even caused some foreign companies to relocate their operations to other countries with a more favorable investment climate. Data from BKPM shows that foreign direct investment (FDI) approvals dropped by almost 42 percent to US$2.5 billion in the first semester of this year from $4.3 billion in the same period last year.

Domestic investment approvals, meanwhile, in the first half of this year, fell by about 70 percent to Rp 11.1 trillion from Rp 39.8 trillion last year.

The Asian Development Bank has also required the government to complete the new investment bill as one of the conditions for the bank to disburse its latest loan.