Mon, 05 Jun 2006

Unfinished bills may stall economic reform

Rendi Akhmad Witular, The Jakarta Post, Jakarta

Investor confidence in the country's economy may further dwindle as the government and lawmakers are showing no sense of urgency about completing the deliberation of key bills related to economic reform, even as time is running out.

Lawmakers have yet to begin the much-awaited deliberation of proposed amendments to three tax laws, a customs law, and an investment law, all of which are aimed at improving the country's investment climate.

Even the planned amendment to the 2003 labor law, which President Susilo Bambang Yudhoyono has promoted during his overseas trips, has been postponed due to widespread protests from labor unions.

With five bills related to economic reform in the House of Representatives, legislators have only five working months left to deliberate the bills if they are to be implemented early next year as planned.

"It's not the time schedule that we are concerned about. It's more the contents of the bills. Please be patient," said the chairman of the House of Representatives Commission XI for financial affairs, Awal Kusuma. The commission is involved in deliberating the five bills.

"We are still gathering comments from the business community before we proceed with deliberation. This is important because the bills proposed are very sensitive for businesses and could have a huge impact," he said.

Past experience has shown that bills on economic affairs take at least two years to be passed due to their complicated nature.

The government has submitted draft revisions of the 2000 law on general taxation arrangements and procedures, the 2000 law on income taxes and the 2000 law on the value-added tax (VAT) on goods and services and the luxury sales tax.

After being delayed for three years, these laws are supposed to take effect in early 2007. They aim to provide significant cuts in bureaucracy, greater legal certainty, and lower tax rates to encourage investment.

The government has also recently submitted a draft revision of the 1995 law on customs, which promises stiffer sanctions for smugglers and expands the definition of smuggling activities. It has also proposed a new bill on investment, which would provide more facilities for foreign investors.

The bills on customs reform and investment are now almost three years behind their original schedule as well.

"The problem with our economy is that the government is not translating its plans into reality. The delay in the deliberation of the tax bills is because the government is still revising them," said Commission XI member Rama Pratama.

Although the government has not officially recalled the tax bills, it has asked the House to halt deliberations as it is still revising them with the business community, according to Rama.

The revisions were made after Yudhoyono appointed Sri Mulyani Indrawati as the new finance minister in November last year, replacing Jusuf Anwar, who was said to have failed to accommodate the interests of the business community in amending the tax bills.

Rama said the legislators were not the only ones to blame for the delay in passing the bills, because the government was also not pushing hard to have them deliberated.