Powel urges RI to redouble reform efforts

Dadan Wijaksana, Jakarta Post, Jakarta

Joining calls for a better business climate, visiting U.S. Secretary of State Colin Powell urged the government to accelerate its efforts to clean up the corruption-prone courts and legal system so as to help restore foreign investor confidence.

Powell stressed on Friday that the current state of the Indonesian judicial system discouraged investment, including American investment, and reforming it would be critical for economic recovery.

"I urge that Indonesia redouble the reform efforts in order to put the economy on a more sustainable long-term footing," Powell told reporters after a meeting with the country's Coordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti.

"American businesses recognize the (potential) of investment in Indonesia but remain concerned about transparency in business and, of course, judicial reform," said Powell, who is on a one- day visit to Indonesia as part of his tour through Asia.

The statement was the latest warning to come from the international community about how the poor performance of the judicial system had put the country off the radar screen as regards investment.

Corruption has long been flourishing in the country's judiciary, right from the top to the bottom.

Relentless and ongoing reform in these area would be highly regarded, Powell added. "Fighting corruption, strengthening the rule of law, all of these are crucial."

The slow pace of judicial reform in Indonesia is one of the reason why investors have been turning their backs on the country.

Instead, they have been shifting their investments to other countries in the region whose legal systems are more predictable, such as China and Vietnam.

Foreign Direct Investment (FDI) approvals for the first semester of the year fell by 42 percent to US$2.5 billion from $4.3 billion in same period last year, data reveals.

Even the United Nations (UN) has expressed concern over the legal uncertainty in the country. Param Cumaraswamy, a UN official, paid a visit last month to conduct an investigation into Indonesia's legal system.

The investigation concluded that widespread corruption had undermined both local and foreign confidence in the judiciary.

Still fresh in the memory is the case of the local unit of Canada-based insurance firm Manulife Financial Corp., which was declared bankrupt by the commercial court on what were widely seen as spurious grounds. This was only the latest in a series of bizarre court rulings.

The Manulife bankruptcy ruling was later overturned and now the government is investigating the three judges who heard the case over whether they had been bribed.

Nevertheless, the damage has been done as the ruling created jitters among foreign investors in the country.

Even President Megawati Soekarnoputri admitted that the country had so far failed to lure investment partly due to uncertainty in the legal system.

Meanwhile, Dorodjatun also indicated that he still wanted to extend the current loan program with the International Monetary Fund (IMF) when it expired in 2003.

"We would very much like to have something for 2004," he said.