House seen avoiding vote on FTZ

Andi Haswidi, The Jakarta Post, Jakarta

Despite mounting differences of opinion over the government's decision to use a regulation in lieu of law (emergency regulation) to expedite the establishment of free trade zones, the factions in the House of Representatives appear determined to approach the issue consensually, rather than putting the matter to a vote.

As of Wednesday, the 10 factions in the House were divided into three groups -- those favoring the government, including the Golkar Party and the Democratic Party, those opposing the government, including the Indonesian Democratic Party of Struggle (PDI-P) and the National Mandate Party (PAN), and the undecided, which are expected to decide on their definitive stances during the final working meeting Thursday evening.

"We will still try to ensure a consensus. However, the PDI-P wants to make it clear that there are no short-cuts to achieving sustainable economic growth," PDI-P faction member Hasto Kristiyanto told The Jakarta Post on Wednesday in reference to the emergency regulation controversy.

He said the government must not succumb to the interests of global investors, even if it faces stiff competition from other countries, such as Malaysia, in attracting inward investment.

The government has argued that the use of government regulations to set up free trade zones was essential in order to enable Indonesia to compete with such countries as the Philippines and Malaysia in attracting foreign investment.

Both countries have established their own free trade zones, with the Iskandar Development Region (IDR) in Malaysia, for example, already having attracted US$1.4 billion worth of investment from the Middle East.

Faced with this reality, the government decided that it was essential to fast-track the development of Indonesian FTZs through the issuance of an emergency regulation in June that amended three articles of the existing FTZ legislation, which stated that the designation of a FTZ had to be provided for by law. As a result of these amendments, an FTZ can now be designated by way of government regulation.

In line with the amended legislation, the government issued three government regulations last month establishing the entire island of Batam, and parts of Bintan and Karimun islands as FTZs, with these zones due to become operative no later than early January.

Upon the coming into effect of the new zones, all import duties, value added tax, luxury goods tax and excise duties will be eliminated. The government hopes to double exports, attract $1 billion worth of new investment and create 130,000 new jobs by 2009, compared with the figures for 2006.

The government has said that thanks to the designation of the Batam, Bintan and Karimun FTZs, 20 firms had expressed a willingness to invest up to $1.8 billion.

All of the House factions will decide on their final stances tonight on whether to accept or reject the emergency regulation, with the formal decision of the House due to be made on Oct. 10.
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