Kadin decries licensing red tape in infrastructure

Kadin decries licensing red tape in infrastructure

JAKARTA (JP): The Indonesian Chamber of Commerce and Industry
complained yesterday that private investors in infrastructure
development face arduous licensing procedures which ultimately
raise the cost of doing business.

"Time consuming license procedures have unnecessarily been
adding greatly to the costs of infrastructure projects," the
chamber's vice chairman, Iman Taufik, said yesterday at a seminar
on infrastructure development.

Citing an example, Taufik referred to PT Paiton Energy, for
whom it took about two years to get a license for its coal-fired
power station project near Probolingo, East Java.

He also referred to the reports by the Japan External Trade
Organization (Jetro), the World Bank and analysts at Columbia
University in Hong Kong which attacked Indonesia's bureaucratic
procedures as the worst in the ASEAN region.

The reports also concluded that corruption and collusion
practices in Indonesia were the third most extensive in the
world.

Apart from the licensing procedures, Taufik cited such
obstacles as high land-acquisition costs, land prices and price
mark-ups by state-owned suppliers as hindering infrastructure
development.

He said that the high costs of infrastructure projects
financed by private investors were also caused by the high
interest rates set by bank lenders. The rates often reflect high
country risks and the unusually high margins set by investors who
get projects through direct appointment, and not through open
tenders.

"The requirement for foreign investors to bring in local
shareholders, who for the most part do not put up any equity,
also adds to the costs," Taufik said.

"We should give more attention to the high cost problem
because infrastructure development is vital to the country's
competitiveness in the global market," he said.

The high costs, according him, can be reduced by
standardization of infrastructure projects and bids as well as by
making the bids for build-own-operate or build-operate-transfer
deals fully open and transparent.

The government, he said, will soon issue an anti-trust law to
protect Indonesian businessmen from unfair competition in the
form of monopolies, oligopolies and cartels.

The Chairman of the Indonesian Industrial Estates Association
Halim Shahab told the same seminar that the development of
industrial estates also has been hindered by complex licensing
procedures.

He suggested that the government set up a National Authority
of Industrial Estates as a private entity in charge of processing
all the permits needed for industrial estates.

"Such an authority like the Batam Development Authority should
be responsible directly to the President," Shahab said.

But even the Batam Authority, according to Shahab, has not
functioned as a one-stop service center for licensing as the
Shenzen Authority in China has done. (04)