Legal uncertainty concerns foreign investors: Expert
Legal uncertainty concerns foreign investors: Expert
JAKARTA (JP): Foreign investors are more concerned by legal
uncertainty than any other disincentives to investment, an
executive said yesterday.
Saiful Haq, tax division head of Prasetio Utomo Consult
accountancy and management consulting company, said foreign
investors did not see local income tax rates as a great
disincentive.
"They are concerned more with legal certainty than the 30
percent income tax rate," Saiful Haq told journalists during a
break at Arthur Andersen's Asia Pacific tax and business advisory
meeting and seminars here.
Arthur Andersen is an international partner of Prasetio Utomo
& Co, which manages Prasetio Utomo Consult.
Further cuts in income tax rates will not attract more foreign
investors as many other countries offered even higher tax rates,
Saiful said.
Offering privileges to foreign investors may attract foreign
capital, but it is meaningless if Indonesia fails to assure
foreign investors of legal certainty, he said.
He did not elaborate on the country's legal uncertainty which,
he said, was caused by its legal structure and law enforcement.
Another executive at the meeting said it was common knowledge
among foreign investors that Indonesia had a bad record in
protecting investors.
Rulings were often inconsistent, with one department's rulings
often differing from another department's, she said.
Saiful said that despite some legal infrastructure problems,
Indonesia remained attractive to foreign investors.
"Many, many foreign investors want to invest here -- I know
that -- considering the size of our market, our economic growth
and our increasing purchasing power," Saiful said.
He said every week his company helped prepare about five
applications for foreign investment projects for companies from
Malaysia, Singapore, Hong Kong, Japan and other countries in the
region.
"Malaysia's increased investment here is unprecedented,
especially in the agro-industry," Saiful said.
Foreign investment commitments have increased dramatically in
the last four years, from $8 billion in 1992, to $23.7 billion in
1994 and to $39.9 billion in 1995. The government has targeted it
would approve $27 billion worth of foreign investment projects
this year.
John A. Prasetio, president of Prasetio Utomo & Co., said
Indonesia's economic fundamentals remained sound although there
were concerns in some micro-sectors.
He forecast that Indonesia's economic path would not change
much despite a projected major reshuffle in the country's
political leadership.
"Everybody seems to be concerned about a leadership change
that might change the direction of economic development. However,
I believe that any change in the leadership will not bring about
many changes in economic development," John said. (rid)