Ministers say investment climate improving

Ministers say investment climate improving

Riyadi Suparno, The Jakarta Post, Tanjung Benoa, Bali

Indonesian economic ministers have assured Indonesian and
Australian businesspeople that the improving relations between
the two countries will serve as a "window of opportunity" for them to
start or even increase their business activities in Indonesia,
but many of them are still deterred by the high cost of doing
business here.

Coordinating Minister for the Economy Aburizal Bakrie and
Minister of Trade Mari E. Pangestu told the businesspeople
gathered here for the two-day Australia-Indonesia Business
Conference that they must utilize the momentum provided by the
improving relations to further broaden relations, or else others
would get in first.

Both ministers painted rosy pictures of doing business in
Indonesia, saying that the investment environment was improving
quickly, and that the government was working hard to lower
investment and transaction costs.

Gross domestic product, for example, had surpassed the pre-
crisis level, and the government was aiming at 5.4 percent growth
this year and an average of 6.6 percent growth over the next five
years.

"As purchasing power has been restored to the pre-crisis
level, this means plenty of opportunities," Mari told the
assembled businesspeople.

With increasing purchasing power, the retail sector should
prove more attractive to Australian businesses, which had thus
far concentrated on the mining and energy sectors. This sector
would also continue to be attractive, especially given rising
commodity prices.

Other areas that would be of interest would be the service
sectors, such as health, education and banking.

Another sector that merited special attention was
infrastructure, which Australian firms rarely considered,
Aburizal said.

He noted that the government was offering a total of 91
infrastructure projects, with many of them being put out to
tender, including toll road and water projects. These projects
would need a total investment of over US$100 billion.

"Our plan is that more than 60 percent of this funding will
come from foreign investors like you," Aburizal said.

Aburizal explained that the government planned to offer
further infrastructure projects worth more than $50 billion in
November.

The businesspeople, however, gave a guarded welcome to the
offers. Many of them complained about the continuing high cost of
doing business in Indonesia, mostly caused by illegal charges,
extortion and simple corruption.

Bill Sullivan, a director of PT CB Indonesia, for example,
asked ministers about the progress made in reducing the high cost
of customs clearance. He also asked whether the government would
entertain the idea of contracting a private firm to take over
customs clearance duties, like Soeharto did from the second half
of the 1980s until the mid-1990s.

Similarly, D. Setiaji Hadiprayitno, a manager at Petrosea,
asked about how the government would deal with high costs at the
country's ports and corruption in general.

J. Scott Younger, a commissioner of Glendale Partners, raised
the issue of legal certainty, especially in the infrastructure
sector. The government has promised to expedite the issuance of
11 regulations on infrastructure. And yet, only a few have been
delivered so far, including those on electricity, toll roads and
water.

He also noted that nationalistic verdicts by the
Constitutional Court, especially on the Electricity Law, did not
bode well for the government's efforts to attract foreign
investors to the infrastructure field.

"The Constitutional Court can screw things up ... My investor
friends in power are saying, 'Forget the power sector in 2005. Let the
government sort it out, and we will comeback afterwards.' So,
they are waiting. But this is a crucial issue for Java, where
there is no spare capacity at all," he said.

And now, the Constitutional Court was hearing a challenge
against the constitutionality of the Water Law. And if the court
annulled that law, it would spook investors even more.

Responding to the questions, and also complaints, both
ministers gave assurances that the government was aware of the
problems and had taken various measures to address them.

The government had, for example, established a joint team to
seek ways to reduce costs at Jakarta port, through which most of
the country's imports and exports passed through.

"We will wait for the findings later this month, and then we
will take action based on them," Aburizal said.

On the promised infrastructure regulations, Mari explained
that the government was now finalizing a draft regulation on land
acquisition for infrastructure development, and revising two
presidential decrees on public-private partnerships in the
infrastructure field.

In addition, the government was currently holding discussions
on new regulations governing airports, air transportation, sea
transportation, public safety and security, and railway
infrastructure. Mari also explained that the new investment bill
was now ready and would be sent to the House of Representatives
for debate in May.

The bill will be support foreign investment by putting foreign
and domestic investors on a par, getting rid of the divestment
requirement and establishing a disputes settlement mechanism.

"So, we in the government are aware of the problems and
people's needs, and we are moving to address them. But this will
take time. We are determined to address them and will eventually
prove to the public that we are making progress," she said.