Susilo blamed for not improving investment climate

Susilo blamed for not improving investment climate

Rendi A. Witular, The Jakarta Post/Jakarta

Today marks the 100th day of the administration of President
Susilo Bambang Yudhoyono. According to many assessments, his
government has yet to produce results in terms of the economy,
having failed to bring improvement to the country's investment
and business climate.

Significant inroads have not been made in mending the
country's poor business environment -- mainly due to corruption
and lack of legal certainty -- and the country's first directly-
elected president is still far from meeting his campaign promises
in this regard.

A number of disputes between the government and foreign
investors over the sanctity of contracts have run aground,
putting the government's business credibility on the line.

"The government has lost its momentum in settling outstanding
disputes with foreign investors. The disputes have become a gauge
of the government's seriousness in improving the investment
climate," said Standard Chartered Bank economist Fauzi Ikhsan on
Thursday.

"Both local and international business communities are waiting
for the disputes to be settled before they feel secure in doing
business here. Therefore, the government needs to seriously
address the problems immediately."

Susilo's administration has named three high-profile cases --
Cemex SA in the dispute over state-owned PT Semen Gresik, the
Karaha Bodas Company (KBC) power station dispute, and a row
between state firm Pertamina and ExxonMobil over the Cepu gas and
oil field -- as its top priority.

Fixing these matters would automatically improve the nation's
investment climate.

Indonesia is in dire need of foreign financing for its massive
infrastructure projects in an effort to boost the country's
economic growth to 6.6 percent annually over the next five years.

The government offered 91 infrastructure projects worth $22.5
billion to foreign and domestic investors during the
Infrastructure Summit on Jan. 17 and Jan. 18.

It will need around US$150 billion for the development of all
its planned infrastructure facilities. Some $25 billion is
expected to come from the state budget; $30 billion from domestic
finance institutions; $10 billion from foreign donors; and $80
billion from private and foreign investors.

Susilo's administration has reiterated that its main long-term
economic targets are to create a stable and strong economic
environment, increase national economic output, and to boost the
public's purchasing power.

Aside from ensuring legal certainty for business, the goals
are expected to be achieved by providing adequate infrastructure,
revitalizing local economies, a focus on agriculture and
manufacturing, strengthening of small and medium enterprises, and
reform of the tax system.

But as of today, only a few concrete policies have been issued
by economic ministers to help accelerate economic reform. Most
ministers have only issued plans and projections.

"It is unlikely that Susilo can keep his promises with the
economic team that he has in the cabinet. There is a wide gap
between him and his ministers," said Rama Pratama, a member of
the House of Representatives' Commission XI for financial
affairs.

He underscored Susilo's broken promises in reducing the
country's ballooning foreign debts by receiving more loans from
foreign donors, on the back of the financial impositions for
rebuilding Aceh following the deadly tsunami. The Dec. 26
calamity killed at least 160,000 people and devastated
infrastructure in the province.

Rama said the deficit in the state budget could be greatly
reduced if the government got serious in combating corruption,
especially in the tax office.

"We are now losing confidence in the government. There is
clear evidence that none of the corrupt key officials in economic
ministries have been replaced," said the legislator from the
Justice and Prosperous Party, a stout ally of Susilo.

State Minister of National Development Planning, Sri Mulyani,
acknowledged that there were still many plans laid out by the
government that had not materialized within the promised period.

She argued that the delay was due to the government's caution
in issuing policies in order to avoid problems in the future.

"All policies are developed based on prudent management. It is
normal if the government cannot immediately decide on a policy as
it needs proper analysis to avoid mistakes."

The government plans to issue a book evaluating its first
three months, with each minister chronicling their achievements,
Mulyani added.