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)