Oil and gas industries criticize new investment bill

A'an Suryana, The Jakarta Post, Jakarta

Local oil and gas companies are urging the government to revise the draft of the new investment bill because it is "too liberal."

"If the government sticks with the bill, the local downstream oil and gas industries will be sidelined because they cannot yet compete head on with foreign players," Heroe Widjatmiko, chairman of the Indonesian Steel Pipe Industries Association, told reporters during a break in an investment forum on Tuesday.

It took the government over a year to draft the investment bill, which it plans to submit to the House of Representatives immediately for deliberation.

Many sees the bill as too liberal because it aims to open up almost all sectors of the economy, except the strategic upstream oil and gas sector, to foreign competition.

But downstream oil and gas companies are arguing that they are not yet ready for direct competition with foreign companies.

"Local downstream industries are technologically unprepared for direct competition with foreigners, especially the global players," said oil and gas observer Ramses Hutapea.

Ramses suggested that there should be a delay in the implementation of the bill after it is passed into law, in order to allow Indonesia to catch up with the developed world in terms of technology.

"The World Trade Organization has adopted this kind of scheme for the developing world, and we can use it as well. The scheme could be attached to the new bill," he said.

The new investment bill will replace the foreign and domestic investment laws that were passed in 1967 and 1968, respectively.

The new bill is aimed at helping to attract more foreign investors to the country.

One of the important features of the bill is the scrapping of the 30-year time limit on foreigners holding a majority stake in projects.

Foreign investors at present must divest at least 51 percent of their projects to local partners after 30 years.

The new bill also reviews a list of areas closed to new investment and produces a new list based only on "moral and environmental" considerations.

The chairman of the Investment Coordinating Board (BKPM), Theo Toemion, said the drive to liberalize the country's investment sector was crucial to reviving faltering investment here.

Foreign direct investment approvals in January fell to US$321.8 million from $486 million in the same month the previous year.

Over all of last year, foreign investment dropped sharply to $9.74 billion from $15.06 billion in 2001.

Experts have blamed lingering labor conflicts and the lack of legal certainty in the country for the drop in investment, which is crucial to help the country increase economic growth and create greater employment opportunities.