Investment bill 'must end inconsistencies'

The Jakarta Post, Jakarta

The planned new investment bill should focus on addressing the conflicting jurisdiction between the central and regional governments, which has discouraged investors from putting their money in the country, experts said.

Economist Chatib Basri and Anton Supit of the National Economic Recovery Committee (KPEN) said on Tuesday that regional autonomy, which provides greater authority to regions in managing their economic affairs, remained a stumbling block to reviving the country's faltering investment.

"Investors need consistency of policy between the central and regional governments. That has not happened with regional autonomy," Chatib told The Jakarta Post.

Many lingering disputes between investors and the government indicate the inconsistencies that existed between central and regional policies, he added.

Anton shared Chatib's view, saying the bill should outline the jurisdictions of the central and regional governments in regards investment policy.

For example, Anton said, a particular inconvenience was the double taxes many companies paid, as regions also slapped on hefty taxes in a bid to help finance their budget.

"Such practices are highly disruptive for investment," he said.

The new investment bill will be submitted to the House of Representatives for deliberation during its final session in August and before new House members are installed in October.

The new bill will replace Law No. 1/1967 on Foreign Investment and Law No. 6/1968 on Domestic Investment, which were deemed unsuitable for current trends.

Once enacted, the bill is expected to help revive dragging investment, which was one of the main engines of economic growth before the late-1990s economic crisis.

Today, investment makes up only 10 percent of the country's gross domestic product; domestic consumption has been the main contributor to economic growth over the past few years.

Approval of foreign investment dropped by 34 percent on-year during the first semester to US$3.05 billion due to election jitters and legal uncertainties, among other.

Domestic investment, on the other hand, rose by 52 percent to Rp 15.77 trillion from the same period last year.

A key point in the bill is the establishment of one-stop investor service centers in regions, ostensibly to cut red tape.

While praising the initiative, Anton and Chatib warned of possible conflicts that might surface.

"What if the one-stop regional service centers issued completely different decisions than the BKPM? Is there a mechanism to resolve such disputes?" Chatib said, referring to the Investment Coordinating Board (BKPM), which has the authority to approve any proposed investment in the country.

Unless the government can eliminate such inconsistencies in policy with local governments, the new law could not do much to woo investors to the country, Chatib said.

"The keys to investment is legal, labor and local (incentives). Much of the problem in Indonesia has to do with the local. Tax breaks and incentives are not enough to attract investors," he added.