From The Jakarta Post

Local governments call for greater certainty over investment permits

The Regional Representatives Council (DPD) and local investment agencies have urged the central government to ensure more consistency in investment permit regulations as many foreign investors are reluctant to do business here due to a lack of legal uncertainty.

"Many parties have complained about a lack of legal certainty with regard to investment permits. We need more detailed and clearer regulations," said the chairman of the DPD's Ad Hoc Committee II, Sarwono Kusumaatmadja, on Monday, adding that the council was drafting an investment bill to resolve the problem.

He said the current regulations on investment permits were unclear and frequently contradicted the Local Autonomy Law.

"Under the Local Autonomy Law, investment permits should be issued by the local administrations, but under Presidential Decrees No. 28 and No. 29 of 2004, the central government is given the task," he said.

Presidential Decree No. 120/1999 on local autonomy provides that provincial investment coordinating boards (BKPMD) and governors have the power to issue permits to both local and foreign investors.

This is supported by Law No. 22/1999 on provincial administration and Government Regulation No. 25/2000, which provide that the granting of approval and permission for direct foreign investment is the responsibility of the provincial administrations, while regency and municipal administrations are given the right to approve domestic investment plans.

However, in 2004, then President Megawati Soekarnoputri issued Presidential Decrees No. 28 and 29, which were supported by Investment Coordinating Board Directives No. 57 and 58 of 2004, which returned these powers to the central government.

"The presidential decrees should not be implemented as they run contrary to Law No. 22/1999 on local autonomy," Ad Hoc Committee II member Kasmir Tri Putra said.

The Provincial Investment Agencies Forum, represented by the Jakarta and Riau agencies, have urged that investment approval powers be returned to the provincial administrations.

Riau provincial investment agency director Tiolina Pangaribuan said that after the issuance of the presidential decrees, investment in Riau had plunged.

"Investment approvals in Riau dropped from about US$4 million in 2003 to US$123,000 in 2004," she said, adding that the decrees had badly affected the province's revenue.

The forum said that many foreign investors were reluctant to put their money in the regions due to confusion over whom they should apply to for investment permits.

According to the latest figures from the BKPM, realized foreign direct investment between January and October 2005 more than doubled to $8.55 billion (785 projects), compared to $3.23 billion (241 projects) in 2004, despite the legal certainty problem.

Domestic investment up until October 2005 grew 36 percent to Rp 16.63 trillion ($1.66 billion) involving 178 projects compared to Rp 12.19 trillion involving 88 projects during the same period in 2004. (JP/01)
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