Thu, 14 Aug 2003

KPEN proposes list of must-do actions to govt

The Jakarta Post, Jakarta

The National Economic Recovery Committee (KPEN), an influential business lobby, has recently sent to the government a list of actions the latter must do to speed up the pace of the country's economic recovery.

The proposed actions are basically aimed at improving the investment and business climate at home, which in turn should help push economic growth.

"The priorities in the economic recovery agenda are maintaining macroeconomic stability, reducing business uncertainties and risks, as well as improving the investment climate," said the KPEN letter, which was signed by its chairman Sofyan Wanandi. This paper obtained the copy of the letter on Wednesday.

It added that the business community was hopeful that the government could take the recommendations into consideration in drawing-up the country's post-IMF economic reform program to be unveiled by President Megawati Soekarnoputri on Friday.

KPEN said a revival of the banking sector's intermediary role was crucial to allow the corporate sector to benefit from the current stability in macroeconomic indicators.

One way to do that was to push interest rates on bank loans down to between 12 percent and 15 percent, so that the loans would become more affordable to the business sector.

The macroeconomic picture has been relatively stable since early this year as evident in the rapid appreciation of the rupiah and benign inflation, but this positive development has failed to translate into higher investment activities due to a number of lingering problems and uncertainties.

As for ways to reduce uncertainties and risks for the business sector, KPEN urged the government to accelerate the legal reform program, cut red tape, eliminate illegal fees imposed on businesses, improve security conditions, improve implementation of regional autonomy, and resolve labor conflicts.

Those factors have created the high-cost economy, and further eroded the country's business climate with investors and businesspeople not receiving any incentives and even being discouraged to do business here, the KPEN letter said.

Another important factor that can help improve the investment and business climate is the reform of the country's taxation system.

KPEN has also urged the government to provide tax amnesty to encourage people to start paying their taxes in full.

Tax amnesty could serve as a motivation for tax-payers to report all their assets, which could in turn boost state tax revenue, KPEN added. "This can be done by introducing a one-shot tax amnesty for assets collected until 2002."

KPEN also stressed the importance of providing sufficient business infrastructure and to support economic activities, while also highlighting the alarming level of smuggling activities in the country.