SBY to issue new economic package

Rendi Akhmad Witular, The Jakarta Post, Jakarta | Mon, 05/12/2008 6:46 AM

The administration of President Susilo Bambang Yudhoyono is slated to issue its last package of economic policies later this month to help expedite private investment and spur economic growth ahead of next year's elections.

A copy of the draft package, titled Focus of Economic Programs 2008-2009", obtained recently by The Jakarta Post from the Coordinating Ministry for the Economy consists of a series of planned regulations and actions by the economic ministers.

"It will be a kind of guidance for ministers until the end of 2009 .... I cannot say about the timing of its issuance as the President is still reviewing it," outgoing Coordinating Minister for the Economy Boediono told the Post recently.

An official with Boediono's office said the package had been scheduled to be issued this week, but because the government planned to raise fuel prices it would likely be delayed.

"The package is on the President's table now. He may change or put in some additional points to help cushion the impact of the fuel price increases," said the official.

According to the package, the economic team will focus in the remaining 16 months before next year's general election on improving the investment climate and stabilizing the macro-economy and financial institutions.

Improving the management of the country's natural resources, environment, and agriculture sector, empowering small and medium enterprises, and reforming the labor and transmigration sectors are other key policies.

The package also addresses energy supply, upgrading infrastructure and speeding up the economic integration of the Association of Southeast Asia Nations (ASEAN).

Among the key issues in the economic package is a revision of government decree No. 1/2007 on income tax facilities for investment in certain sectors and regions.

Investors have yet to enjoy the privileges outlined in the decree due to different legal interpretations between the tax office and the Investment Coordinating Board, which pledged the facilities.

Under the decree, investors are meant to be given a 30 percent income tax reduction for a period of six years. At present, there are more than 17 firms with a total investment of US$7 billion waiting for the decree to be implemented.

Another important issue in the package is a revision of a cost recovery scheme for oil and gas producers, as well as transparency in the revenue and management of the energy and the mining sectors.

The government has been under public pressure over the contracts and facilities given to private energy and mining firms, which are seen as lacking transparency and being riddled with questionable transactions.

Senior officials from the Finance Ministry have demanded the Energy and Mineral Resources Ministry strictly supervise the energy and mining sectors to maximize state revenue to finance development.

Indonesian Chamber of Commerce and Industry (Kadin) chairman Mohamad Suleman Hidayat expressed doubt over the effectiveness of the planned economic policy package.

"Businesses are skeptical about the implementation of the policies. The previous economic packages have run aground because of bureaucratic problems. All of the business problems in this country stem primarily from bureaucrats," he said.

President Yudhoyono has issued more than five economic packages to help lure foreign investment and spur growth.

Indonesia, Southeast Asia's largest economy, has trimmed its economic growth target to around 6 percent this year from an initial forecast of 6.4 percent due primarily to accelerating inflation from skyrocketing global commodity prices.

Eyebox Key policies in the draft package

Draft laws: 1. Special economic zones 2. Financial safety net 3. Pawn services (liberalization) 4. Credit management 

Presidential decrees and government regulations: 1. Integrated investment license processing 2. Railway infrastructure 

Ministerial decrees: 1. Immigration privileges for foreign-direct investment 2. Acceleration of import process for capital goods and raw materials for foreign-direct investment 3. Fiscal incentives for foreign-direct investment 4. Facility expansion for tax rebates 6. Synchronization of logistic services 7. Revision of decree on pension fund investments 8. Gas retail prices 9. Revision of regulations on upstream oil and gas sector 10. Electricity retail prices from geothermal power plants 11. Food estates 12. Trade facilitation and tariff exemption within the ASEAN integration frame 13. Liberalization of air freight services within ASEAN 14. Labor dispute settlement through third parties 

Action plans: 1. Highway expansion to Tanjung Priok Port 2. Accelerating the implementation of the National Single Window for improving export and import procedures 3. Completing financial system architecture 4. Completing early warning system for financial stability 5. Regrouping of state firms, from 139 to 87 firms 6. Privatization of 44 firms by 2009 7. Securing coal supply for 10,000 MW power projects