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)