Investors Still Complain About Overlapping Regulations, Tax Issues: BKPM Head

BKPM Head Thomas Lembong answers reporters’ question after attending a limited meeting, at the Presidential Office, Jakarta, Wednesday (11/9). (Photo by: Agung/PR)

The ongoing US-China and trade war provides rare opportunities for developing countries like Indonesia; yet, Indonesia is still lagging behind Vietnam when it comes to attracting investors, Head of the Indonesian Investment Coordinating Board (BKPM) Thomas Lembong said.

Nevertheless, Thomas expressed optimism that there are still opportunities to lure investment thanks to international perception of Indonesia that remains positive.

“The fact is that Rupiah continues to strengthen and the price of government bonds continues to rise, showing that international investors are very appreciative of Indonesia, which continues to be consistently oriented towards the order of economic reforms, and to remain prudent, very rational and responsible in managing our macro and economic policies,” Thomas said after attending a limited meeting at the Presidential Office in, Jakarta, Wednesday (11/9).

Thomas went on to say that based on the report of the World Bank last week, a threat in the form of sluggish world economic growth is plaguing developing countries, namely capital outflows, resulting in investors withdrawing large amounts of investment.

Consequently, he added, this situation could hurt exchange rate and foreign exchange reserves of the central banks of developing countries, including Indonesia.

The solutions to this problem, according to Thomas, are measures to be more effective so as to survive in regional contestation and to lure investment in factories that can create jobs and new sources of economic growth.

In the meantime, in a limited meeting that discussed the problem of Improving the Investment Ecosystem, Thomas also unveiled top five complaints filed by investors both at the regional and international levels, among others, relating to regulations such as, unclear, overlapping regulations, regulations which are subject to change without prior notice, and long-winded licensing.

“Registration is used as a permit, conditions are used as permits, text recommendations are used as permits, everything is used as a permit. All these hinder the processes of the business world,” Thomas explained.

Another complaint concerns taxation issues. “To be honest, although there have been many improvements, there are still a lot of complaints from investors in terms of tax treatment or treatment to investors,” Thomas said.

Land-related issues is another complaint voiced by investors. According to Thomas, a number of land issues are still reported such as land disputes, difficulties in clearing land and obtaining building permits. Obtaining a function-worthy certificate is also not costly but can also take months, he added.

Investors also complain about the issue of labor, Thomas said. According to him, Manpower Law of 2003 is no longer relevant. “The law has been 16 years old and the world has changed significantly and labor adjustments are needed to make it more flexible, more modern, more reflective of the reality of employment in the 21st century,” said Thomas.

The last complaint is related difficulties faced in the state-owned enterprises sector (SOEs), Thomas added.

“We must also acknowledge that there are a lot of complaints from private business regarding the dominance of SOEs and a rather inharmonious relations between the private sector and SEOs,” Thomas said, adding that, President Joko “Jokowi” Widodo has given a one-month deadline for ministries/institutions to address those complaints

Consequently, Thomas added, a massive pruning of rules, conditions, obligations, permits have to be in place.

“It all takes time and unproductive energy to check permits. As a matter of fact, permits are also used as gimmicks or transactional objects for extortion or it can be subject to extortion by law enforcement officials. These are all unproductive activities,” Thomas said, adding that he had received a green light from the President to reprimand ministers for establishing too many unproductive regulations.

“So, in a few weeks, I will speak up about those issues,” he said. (FID/AGG/ES)

Translated by: Muhardi

Edited by: M. Ersan Pamungkas