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.