Minister says draft law will drive investment

Benget Simbolon Tnb., The Jakarta Post, Jakarta

Indonesia is banking on an investment draft law recently submitted to the House of Representatives to improve the business climate and the flow of investment into the country.

The draft law would streamline procedures for doing business, for example cutting the time needed to establish a business to 30 days from the current 150 days, according to Trade Minister Mari Elka Pengestu.

"We hope they (the House members) will pass it into law some time before the end of this year," Mari said during a weekend discussion with journalists on the draft.

The draft, which would replace the 1967 Foreign Investment Law and the 1968 Local Investment Law, covers basic and general principles, with the details to be laid out in subsequent implementing regulations, Mari said.

These implementing regulations would consist of government regulations on the negative list of investments, the procedures for investments, an integrated service system and fiscal incentives.

"The new (draft) law will create a conducive situation for investments. We hope it will be able to push up new foreign investments," Mari said.

It is hoped the new draft will also change the image of Indonesia as one of the most difficult countries in Asia for doing business, the minister said.

According to a World Bank survey, potential investors who hope to start a business in Indonesia have to deal with 12 different procedures, as compared to eight in Thailand and nine in Malaysia.

The average time required to start up a new business in Indonesia is 151 days, compared to 33 days in Thailand, 30 days in Malaysia and 50 days in Vietnam.

In China, while investors have to deal with 13 different procedures, the average time for starting a new business is only 48 days.

The survey also found that Indonesia is categorized as "unattractive" for investors due to the difficulty of hiring and firing workers.

According to Mari, while the draft should cut the procedures and time needed for investment, it will also provide legal certainty and protection from nationalization for foreign-owned businesses.

Other issues addressed in the draft are land clearance and overlapping regulations issued by regencies and municipalities -- two long-standing problems for investors.

Since regional autonomy came into effect in 2001, instead of streamlining investment licensing procedures, many regional administrations have introduced thousands of new regulations and bylaws, raising the cost of doing businesses and dampening the appetite for doing business in the country.

Mari said the government would continue streamlining the licensing process to encourage investment.
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