TRIMs must be part of investment law: Expert

TRIMs must be part of investment law: Expert

JAKARTA (JP): An investment expert suggested yesterday that
the government, which is drafting a new investment bill,
accommodate all principles being negotiated in the Trade on
Related Investment Measures (TRIMs).

Soegijanto, a retired senior official of the Investment
Coordinating Board, noted that countries negotiating on TRIMs --
part of the new General Agreement on Tariffs and Trade (GATT) --
have agreed on three of the eleven principles to reduce
investment barriers, including requirements related to local
contents, export drive and balance of payments.

The eight other principles, which require further negotiation,
include the limitations on production capacity and production
categories, requirements on the production of certain products,
foreign exchange control, transfer of technology, the limit of
foreign investment licenses, the obligations on local equity
holding, as well as investment incentives.

"It's better for us to include all of them in our drafted
investment bill. When they finally become parts of the TRIMs
provisions, we will not have to change our investment law again
and again," Soegijanto said at a two-day seminar on investment
laws conducted by the Center for Legal Studies.

To suit the TRIMs provisions, Soegijanto suggested that the
government drop its local content requirements, especially for
the automotive and fishery industries, which he said do not
really improve with such a policy.

Economist Mari Pangestu predicted that the automotive sector
will be hurt most by the absence of local content requirements,
although it is exempted from the government's GATT commitment on
import tariffs of no more than 40 percent.

Opening

To attract more foreign investment inflow, Soegijanto said,
the government should open up five more public sectors for 100
percent foreign ownership, including telecommunications, railway,
shipping, civil aviation and the media.

Government Regulation No. 20/1994, which is considered by many
as the most liberal ruling, requires a minimum five percent
equity holding for the Indonesian partners in joint ventures in
the above sectors.

Soegijanto also proposed that the government extend the
validity of foreign investment licenses to 75 years from the 30
years under existing laws.

Discussing incentives, Soegijanto noted that the government
can still play with tax incentives to attract foreign investment,
especially within the six years of adjustment to the new GATT
principles.

"We have still room of six years to play with incentives to
develop the eastern part of Indonesia," Soegijanto said. "And we
have to lure foreign investors with incentives, so that this
year's record high of US$23.4 billion in foreign investments can
be broken in the coming years."

He also proposed that the government not impose income taxes
on profits which are used for reinvestment or on profits
generated by companies operating in the eastern part of
Indonesia, and that it collect property taxes only after
companies start commercial production. (rid)