RI's investment climate remains poor: Chamber

The Jakarta Post, Jakarta

The country's investment climate remains in a poor condition despite claims by the government that it has carried out various reform measures as set out in the White Paper, according to the Indonesian Chamber of Commerce and Industry (Kadin).

"The monitoring committee (of Kadin) opines that the most alarming condition is in regard to the investment climate," Kadin said in a press statement, adding that weak export performance, staggering unemployment and lingering labor issues were also a concern.

Kadin has set up a committee tasked with monitoring the implementation of government economic reform programs designed to help maintain confidence in the economy after the country ended the International Monetary Fund-sponsored program late last year.

There are 35 action plans in the White Paper ranging from monetary and fiscal policy to improvement of investment, exports and employment.

On Thursday, Kadin released for the first time the result of its five-month monitoring work.

"Although the government claims that it has implemented various programs in these areas, but in the field, there has been no visible improvement at all," Kadin said.

It said that reports of higher investment figures was only related to approved projects, not realized investments. This is evident from the fact that imports of machinery remains slow. Higher imports would suggest brisk investment activities.

Investment has been scarce over the past couple of years due to various problems at home, including rampant corruption, legal uncertainty, poor implementation of regional autonomy and lingering labor conflicts. The country needs to boost investment activities in order for the economy to grow much faster than the past years' meager growth rate of around 4 percent in order to create employment.

Kadin also said that the hard gained stability in macroeconomic indicators had failed to translate into brisker investment activities.

It added that the weak investment climate had also affected the country's exports, as it weakens the competitiveness of the country's manufacturers and discourages exporters from investing in new machinery.

"The performance of non-oil and gas exports is very disappointing as they grew by less than 4 percent last year," Kadin said, adding that the problems were not limited to trade issues but also included low investment in the export sector and the poor competitiveness of local industries.

Exports are also seen as a key factor to boost the economy, which in the past few years had been largely driven by domestic consumption.

"All of these (problems) cause an increase in unemployment, which has already reached 10 percent of the workforce," Kadin said.

Kadin did not specifically say what measures should be taken by the government to address the problems, but it warned the government that tax and labor issues were among the problems discouraging investment.

"The tax policy, which focuses on revenue, does not create a good business climate," Kadin said, adding that the policy should eliminate gray areas in Tax Law to improve legal certainty.

The government early this year amended Tax Law, which was part of the government's key economic reform measures.

The amended Tax Law is aimed at boosting state revenue.

Kadin also criticized the government's labor policy, describing its as "filled with irrationality".

While there is a tendency for the government to interfere too much in labor affairs, it has failed to complete crucial regulations, Kadin said.