Violence, legal doubts repelling investors: WB

Violence, legal doubts repelling investors: WB

Agence France-Presse, Jakarta

Violence and legal uncertainty are the main stumbling blocks
in Indonesia's push to attract the foreign investment it needs
for economic growth, a World Bank official said Thursday.

"Currently many investors are frightened away by the inability
of the judicial system to enforce contracts (and) by the
increased tendency to resort to violence to settle disputes," the
bank's country director Mark Baird told a seminar here.

"Indonesia cannot achieve a sustained growth rate of five to
six percent per annum without significant amounts of new
investment and this will only happen if the policy environment is
welcoming to new investment," he said.

Baird said investor confidence could be restored by setting a
clear framework for reform and taking "credible steps" in the
right direction.

Minister of Finance Boediono has predicted the recovery in the
global economy should help Indonesia top 3.3 percent in economic
growth in 2002, up from an earlier forecast of 3.0 percent.

The government's move to decentralize and leave decision
making to the regions has given rise to a plethora of overlapping
regulations, taxes and levies, with many critics saying local
government greed was discouraging investment in the region.

The Asian Development Bank said last month that there was "a
widespread perception that the policy environment for investment
in Indonesia has turned harsh and unsupportive."

A U.S. district court has declared Indonesia's state energy
giant Pertamina to be in contempt of court after it used a
Jakarta court to contest a US$261 million damages award against
it by an international arbitration panel.

The judgment, over a canceled power plant project, was in
favor of U.S.-controlled power firm Karaha Bodas.

In another legal wrangle, the South Jakarta district court
last month issued a ruling sequestering the assets of PT Kaltim
Prima Coal (KPC) following a $776 million lawsuit filed by the
East Kalimantan administration.

KPC, equally owned by Anglo-Australian Rio Tinto mining group
and British-American energy giant BP Plc., operates a vast coal
mine in East Kalimantan.

The region's government accused KPC of deliberately delaying
its obligation to divest its 51-percent stake to local buyers.

The World Bank's Baird said a strong global economy might help
Indonesia maintain an economic growth rate of three to four
percent this year but the country would have to do much better if
it wanted to reduce poverty.

He said the government of President Megawati Soekarnoputri
should be praised for what it has achieved over the past six
months.

"However there's no room for complacency. Continued policy
discipline is essential to protect the recent gains on macro-
economic stability and more progress on reform shall be needed to
attract new investment and support the current rate of economic
growth."