Independent body needed to spur IT investment: IFC

JAKARTA (JP): The International Finance Corporation, the World Bank's financial arm for the private sector, has suggested that Indonesia speed up the establishment of an independent telecommunication regulator in a bid to encourage foreign investment in the country's information technology (IT) sector.

Amitava Banerjee, the IFC representative for Indonesia, said here on Monday that establishment of the independent body, which would have the task of managing and regulating the country's IT sector, had become one of the most important prerequisites for foreign investors to enter Indonesia.

"If the establishment is delayed, foreign investors will be reluctant to come here," he said. "It will also make Indonesia lose a very valuable opportunity to boost business activity," he said on the sidelines of an Indonesian International Telecommunication, Media and Information Technology (IITELMIT) conference discussing the prospects of investment in Indonesia's telecommunication sector.

Banerjee said that the independent regulatory body would guarantee fairness and impartiality in the country's IT policies, as its members would be comprised of representatives from the government and private sectors.

He said that the country's telephone line market penetration, which is currently less than 3 percent of the total population, indicated that the government had failed to provide good policies to lure investors into the industry.

With formation of the independent body, private companies would have more say in determining telecommunication tariffs in Indonesia, Banerjee said. "The current telephone tariff is still too low for investors," he added.

Addressing the conference, Minister of Communications Agum Gumelar said that establishment of an independent regulatory body was his top priority.

The minister said that the independent body would be necessary to attract the much needed foreign investment to further develop the country's telecommunications infrastructure.

"The independent body is essential in creating a conducive atmosphere to encourage investment in Indonesia's telecommunication sector," he said.

The minister said Indonesia would need at least US$4 billion in new investments to install new telephone lines in the country by 2004.

According to the IFC's data, total investment in telecommunications in Indonesia and other Southeast Asian countries only reached about $1.2 billion in 1999, compared to $20 billion in South America.

Ministry of Communications director general Djamhari Sirat said guidelines for the regulatory body were being prepared.

The government had conducted comparative studies on similar regulatory bodies in other countries, he said, adding that the best option was to make the regulator directly responsible to the government.

The government plans to form the regulator by year-end, he added.

A senior executive of the Indonesian Telecommunication Society (Mastel), Sukarno Abdulrachman, said that the Indonesian government had missed the deadline to set up the independent regulatory body.

The former director general of telecommunications said in a letter of intent signed with Indonesia's major creditor, the International Monetary Fund (IMF), the government had promised to establish the body before the end of this year. (05)