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."