RI-U.S. businesspeople boost joint intiatives

RI-U.S. businesspeople boost joint intiatives

JAKARTA (JP): Indonesian and American businesspeople, buoyed
by the progress of their first-year efforts, yesterday expanded
their joint initiatives to four new areas they believe are
crucial to improving the competitiveness of the Indonesian
economy.

The 75 executives, who met at the Shangri-La Hotel for the
second annual Indonesia-U.S. Private Sector Roundtable, worked
out a set of recommendations on privatization and deregulation,
small and medium-size enterprises, the protection of intellectual
property rights and human resources.

The first business roundtable in Washington last September
zeroed in on three issues related to their countries' bilateral
tax treaty, Indonesia's distribution system and customs
administration.

"We are delighted by the responsiveness of both governments in
addressing our priorities," noted R. Michael Gadbaw, Chairman of
the U.S.-Indonesia Business Committee, one of the cosponsors of
the roundtable.

Gadbaw said previously the U.S.-Indonesia tax treaty gave
American companies higher withholding rates than their European
and Japanese counterparts, thus penalizing U.S. investors in
Indonesia.

"But we were extremely pleased that the U.S. and Indonesia
signed a protocol on July 24, amending the treaty to lower the
withholding tax rates for royalties, dividends and interests to a
level comparable to our competitors," Gadbaw, who is also a vice
president of General Electric Co., said.

He added that restrictions on imports and distribution imposed
on foreign companies had also been eased by the June 4, 1996
package of deregulation measures.

The deregulation package allows foreign companies to import
complementary products from their affiliates overseas and to sell
their own products locally up to the wholesale level.

The second business roundtable, which was opened by
Coordinating Minister for Production and Distribution Hartarto,
was also co-sponsored by the U.S.-ASEAN Council and the AmCham in
Indonesia and hosted by the U.S. Committee of the Indonesian
Chamber of Commerce and Industry, which is chaired by businessman
Tony Agus Ardie.

Gadbaw added that several programs have been launched to help
modernize and improve the efficiency of Indonesia's customs
administration.

The set of recommendations on the four priority areas was
prepared at a workshop Monday and finalized at the roundtable
meeting yesterday.

Privatization

Regarding the privatization and deregulation of electricity,
water, toll roads and telephones, the roundtable suggested the
establishment of a regulatory regime to function as a rate-
setting body.

"But the regulator must be separate and distinct from any
government company which provides a similar or competing service
and must treat government companies the same as the new private
sector companies," the meeting noted.

The participants brought up two old issues in the petroleum
sector; recommending that oil mining contractors be allowed to
consolidate their taxes related to several concessions and that
oil producers be allowed to sell their own fuel products.

As Indonesia's car population increases, the need for a
denser, more service-oriented distribution system becomes more
urgent," the businesspeople said in supporting their argument for
the deregulation.

They said these needs can be met by foreign direct investment,
and the result would be increased tax revenues to the government.

They hinted that none of the more than 10 private oil refinery
projects are likely to be implemented unless those involved were
allowed to distribute their products.

The meeting recommended that besides power generation, the
transmission and distribution of electricity should also be
opened to private investors.

"We also recommend a more transparent and competitive regime
for independent power projects," the business roundtable said.

They also addressed the problems of high credit transaction
costs and the limited scope of lendings to the private sector,
recommending that banks be allowed to secure loans with movable
assets such as industrial machinery and that the enforcement of
debt contracts be strengthened.

"The U.S. private sector has the technology to develop an
information system to register and track the movement of movable
assets," the businesspeople said in supporting their
recommendation.

The Indonesian government recently enacted a mortgage and
hypothec law but it only covers land, buildings and other fixed
assets associated with land.

The roundtable cited the 30 percent tax collected from the
claims paid to an insured party as a disincentive to further
investments.

"This practice is an issue because it hinders the time in
which a company can restore its plant operations," the
businesspeople noted. (vin)