Regions face tough challenges to lure investors

Adianto P. Simamora, The Jakarta Post, Jakarta

Efforts by regency and mayoralty administrations to provide better policy and bureaucracy would not be enough to lure foreign investors to the regions as many investors were still concerned with the overall uncertainties plaguing the country, Master P. Tumanggor, the regent of the Dairy regency in North Sumatra, said.

"Foreign investors still picture Indonesia as a whole, they don't differentiate between the conditions in each regency," Tumanggor told The Jakarta Post on Tuesday.

"I've just came back from India and Thailand. Investors in the two countries are still concerned with the overall uncertainty in this country."

The Dairy regency was given an award by the Regional Autonomy Watch (KPPOD) for providing the best institutional environment for investors. Among the positive factors seen in the regency are investor-friendly government policy, legal certainty and better bureaucracy compared to those in other regions.

Tumanggor's remarks mean that the central government must also work hard to resolve the various uncertainties in the country.

The central government has often blamed regional governments for the sharp decline in investments in the country. Indeed, many regional administrations, since they obtained autonomy, have been too aggressive in collecting revenues by squeezing investors.

The government is now moving to revise the policy issued in 1999.

But experts have said that legal uncertainty, inconsistency in many central government policies and poor implementation of promised economic reform programs are also creating negative sentiments among foreign investors.

Roderick Brazier shared Tumanggor's view, saying that many investors were still watching what was happening in Jakarta before they decided to enter the country.

But he acknowledged that many provincial or regency administrations were still unaware of the needs of investors.

He said that a book issued by KPPOD ranking 134 regencies and mayoralties by their attractiveness for investment should be a guide for prospective investors. The book is based on a survey sponsored by the Asia Foundation.

"I hope the (book) would help encourage foreign investors to look at investment in Kabupaten (regency) by Kabupaten bases not only just look at Jakarta," Brazier told The Post.

Foreign and domestic investors have long complained of various problems here including lingering labor conflict, security problem, poor implementation of regional autonomy and rampant corruption.

Data from the Investment Coordinating Board (BKPM) shows that foreign direct investment (FDI) approvals plummeted 35 percent to US$9.7 billion last year from $15.06 billion in 2001.

The approval in domestic investment dropped even more to Rp 25.26 trillion in 2002, 57 percent lower than Rp 58.62 trillion the previous year.

Elsewhere, KPPOD also awarded Sawah Lunto regency and Batang Hari regency in Jambi, second and third place respectively for an attractive investment center in terms of a better institutional environment.

But in terms of a combination of social, cultural, political, and institutional factors, the Semarang mayoralty in Central Java and Balikpapan city in East Kalimantan are ranked in the top list.