WB urges speedier legal reforms

WB urges speedier legal reforms

The Jakarta Post, Jakarta

World Bank country director Andrew Steer said on Tuesday it was now time for the Indonesian government to take the political resolve it had demonstrated in its sound macroeconomic management and its prompt response to the terrorist bomb attack on Bali, and focus on improving the investment climate, reforming the legal system and developing good governance.

Steer said at a business luncheon that over the past five years after the onset of the economic crisis, Indonesia had come a long way in restoring macroeconomic stability and managing the decentralization and democratization processes.

But it was now high time to move ahead with the next reform agenda to improve the investment climate and speed up legal and governance reforms, he added.

Sound macroeconomic management, as indicated by steady fiscal consolidation, decreasing government debt burdens, initial banking recovery and declining capital outflows, was one good news about Indonesia these days, he said.

Continuing, he said other positive developments included recent amendments to the Constitution, responding promptly to the Bali bombing, implementing a cease-fire agreement in Aceh, speeding up the pace of structural reforms, enacting the law on the anti-corruption commission, finalizing a new reform program with the International Monetary Fund, and initiating a poverty alleviation strategy.

He warned, however, that the challenges ahead were not less formidable.

The business luncheon was hosted by the Australia-Indonesia Business Council, the American Chamber of Commerce and the Association of Foreign Bank Branches in Indonesia.

In his presentation at the meeting, the country director charted out Indonesia's development prospects, spelling out the good and bad points.

Many of these points have been elaborated on in the latest World Bank report on Indonesia, which was submitted at the recent annual meeting of Indonesia's international creditor consortium, the Consultative Group on Indonesia (CGI).

The main challenges within the investment climate, according to Steer, consisted of corruption and bureaucratic inefficiency -- notably within the tax and customs service, labor tension, issues related to decentralization, erosion of basic infrastructures, perceived insecurity and a mistrusted legal system.

He declined to reply directly to a question as to whether the government had the political will and capability to fight corruption.

Meanwhile, he observed that it could be understandable if the government, which had so far been preoccupied with restoring the condition of its macroeconomy and managing the decentralization and democratization processes, had not put judicial reform and good governance at the top of its priorities.

"But it is now time to do so," he said.

He noted how corruption and bureaucratic inefficiency had stifled investment, as it was now much more time-consuming and costly to obtain business licenses for Indonesia than for other countries. It took three times as much time and money to process business licenses in Indonesia than in Thailand, and twice as much than in China, he pointed out.

In addition, illegal levies accounted for 10 percent of the revenues of small and medium enterprises, he revealed.

Steer especially recounted the gross inefficiency within the customs service, suggesting that it may be time to return to the pre-shipment inspection system that was launched in 1985 by then- president Soeharto, which would strip the corrupt customs service of its inspection authority.

Asked about the calls by politicians and Cabinet members to end the IMF program in Indonesia, Steer replied that it is simply not rational at this stage to get rid of the IMF.

"But I see it (the demand) as a healthy nationalist sentiment if it leads to the right policies to enable the government to make a graceful exit, graduate from the IMF program," he said.

The IMF five-year extended facility will end later this year and there have been increasing political pressure for the government not to renew the program.