Legislators give gloomy view of economic growth

Legislators give gloomy view of economic growth

JAKARTA (JP): Members of the House of Representatives were
gloomy yesterday about the country's ability to achieve an
average economic growth of 6.2 percent as projected during the
current Five Year Development Plan (Repelita VI).

The new investment reform issued by the government last month
is unlikely to provide a more conducive investment climate,
members of the House's Commission VI said in a hearing with the
Investment Coordinating Board (BKPM).

Tajuddin Nur Said, an outspoken member of the Golongan Karya
(Golkar) faction, said that the investment climate in the country
remains less attractive than those of China and Vietnam despite
the new investment reform.

"The issuance of the investment reform is a wrong choice as it
will not be able to address the core of the problems," he said.

He said foreign investors will still prefer to invest in
China, Vietnam or India, which offer more attractive investment
facilities.

Tajuddin, therefore, urged the government to make an
adjustment in the new investment reform and issue a more
realistic and applicable policy such as the introduction of tax
incentives and the extension of land titles which are the
facilities most sought by foreign investors.

The investment ruling issued last month -- the most liberal
measure ever taken by the government in attracting foreign
investors -- not only eases restrictions on foreign ownership but
also includes a dramatic opening of previously closed sectors to
foreign investors, such as seaports, power, railways, civil
aviation, nuclear power and the mass media. The mass media was
then excluded following opposition from Minister of Information
Harmoko.

The reform reduces the minimum equity holding for the
Indonesian partner in a joint venture from 20 to five percent and
removes the compulsory divestment previously imposed on foreign
investments.

BKPM chairman Sanyoto Sastrowardoyo, who is also State
Minister for Investment, said that the new measure is important
in mobilizing investment funds for the just begun five-year
development plan.

Indonesia needs at least Rp 660 trillion (US$305 billion) in
new investment funds to achieve its projected economic growth of
an annual average of 6.2 percent in the Repelita VI period and 73
percent of the total is expected from the private sectors.

Optimistic

Sanyoto said he was optimistic that the investment funds would
reach Rp 600 trillion as targeted.

"This year alone, we expect more than US$10 billion from
foreign investors," he said, adding that a robust growth in
foreign investment commitments is expected to begin next year as
an outcome of the investment reform.

The total investment commitments made by local investors
reached around Rp 215.46 trillion and those by foreign investors
around US$43.68 billion during last five years.

Budi Hardjanto of the Indonesian Democratic Party (PDI) also
urged the government to review the new investment ruling as it is
not only inconsistent with other investment regulations already
issued by technical ministries but also against the law on
foreign investments.

"The investment reform could, therefore, lead to foreign
domination in the country's important and sensitive
infrastructure sectors such as telecommunications, power and
drinking water," said Hardjanto, who is also the vice chairman of
the commission dealing with investment, mining, electricity and
industry.

Iskandar Mandje of the Golkar faction said that the Indonesian
business climate remains less appealing than those of China and
Vietnam.

"Countries such as China and Vietnam do not only provide
cheaper labor but also introduce much more attractive tax
facilities such as a tax holiday and lower income tax rates,"
Iskandar said. (hen)