Investment bill 'must end inconsistencies'

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.