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)