Govt needs to go the extra mile to attract investments: Kadin
Benget Simbolon Tnb., The Jakarta Post
The Indonesian Chamber of Commerce and Industry (Kadin) has warned the government that enacting a new investment law and improving the macro economy would not be enough to generate sustained investment inflows.
Kadin chairman M.S. Hidayat said that Indonesia's competitors, such as China, Vietnam and Thailand, also had competitive packages to attract foreign investment.
"So, if we don't make it (the investment law) more competitive or at least similar to theirs, then it won't be successful in attracting new foreign investment," Hidayat said during a discussion on the new investment bill, which will soon be deliberated by the House of Representatives.
The discussion, which was also attended by Trade Minister Mari E. Pangestu and Investment Coordinating Board (BKPM) chairman M. Lutfi, mostly focused on what was claimed to be the government's excessive focus on the macro economy and insufficient attention to the real issues facing businesses on the ground, such as hidden costs, lack of incentives, too many disincentives, high taxes and tariffs, and bureaucratic and time consuming licensing processes.
Hidayat said that the government should not be satisfied with only restoring the macro economy to health.
"The improvements in the economic fundamentals, such as a stronger rupiah, are not enough to attract investors," he said. "The most important thing is how to make investing in Indonesia less costly," he added.
The government, he said, should also pay more attention to the urgent issues, such as hidden costs, high taxes and burdensome regulations, that had long been complained of by business.
The chairman of East Java's Kadin branch, Airlangga Satriagung, noted during the discussion that one of the main issues facing firms was the hidden costs in doing business in Indonesia.
"If you want, for example, to secure your license faster, you have to pay more," he said, adding that such costs were unpredictable.
Other Kadin members complained that the government often acted contrary to its own promises. "While promising to provide incentives to improve the investment climate, it instead issues regulations the only serve to hamper business," he said.
"When one product or sector starts performing well, then the government will slaps new taxes on them," he added.
Mari said that the government would heed the suggestions made by Kadin. She also said that the government would reduce taxes to make Indonesia more competitive than its competitors.
But she added that it was highly unlikely that the government would give tax holidays to investors, even though other countries continued to do so.
However, Lutfi said that the BKPM was urging the government to introduce other forms of tax relief that would achieve the same objectives as a tax holiday.
"We won't use the term 'tax holiday', which currently meets strong resistance from government officials. Instead, we could call it a kind of deferment tax," he said.
He noted that an automotive company from the United States was currently building a new plant in Greater Jakarta, while a number of shoes firms from South Korea would relocate their plants from China to Indonesia.
"Together, they will employ tens of thousands of workers here," he said, adding that the relocations were due to the European Union's imposition of antidumping duties on China.