City to cut red tape in foreign investment

Mustaqim Adamrah, The Jakarta Post, Jakarta | Thu, 04/10/2008 11:25 PM

The Jakarta administration and the private arm of the World Bank have joined forces to find ways to attract foreign investors to the city.

The International Finance Corporation (IFC) and the city administration signed an agreement Wednesday at the office of the Jakarta Bureau of Capital Investment and Regional Monetary Management.

The agreement secures for the administration the two-year appointment of an advisory assistant from the IFC to make recommendations on improving the city's business climate.

The IFC consultant will make recommendations on how to reduce the processes required for issuing business permits.

An IFC survey showed red tape in obtaining licenses discouraged foreign investors from doing business in the capital.

Because of conditions in Jakarta, Indonesia was ranked 123 out of 178 countries in the survey in terms of business climate.

"We hope with this assistance, investors will only have to wait 38 days to receive a permit -- considerably less than the 169 days it takes currently -- and will only have to process eight permit applications, more than halving the current number of 19," said bureau head Sukri Bey.

"Consequently, it will cost less for investors to register their businesses here."

IFC associate operations officer Farida Lasida Adji said the first step would be to conduct field studies to determine the actual time and money businesses spend for every permit required.

"Later, we'll work out which steps need to be eliminated to expedite business-related license applications and find ways to improve efficiencies," she said.

She said the IFC's assistance in Denpasar and Tabanan in Bali, and in Tulungagung in East Java, enabled the administrations to cut costs incurred processing business permits by 70 percent.

Sukri said he did not expect foreign investment to increase significantly this year, despite the two institutions' ultimate goal of attracting more investors through the bureaucratic reforms.

"We can only hope foreign investment this year will increase by 65 percent on the Rp 44 trillion posted last year," he said, adding that amount would not be sufficient to keep the city's economic growth at 6.3 percent.

He said it would require Rp 112 trillion (US$12.19 billion) in foreign investment alone to reach the growth rate this year.

The bureau is expecting 400 projects run by foreign investors this year, compared to 365 last year, he said.

Last year, the city's economy grew by 6.4 percent, with a total regional domestic output of Rp 332.7 trillion.

The administration initiated a single-window business registration system early this year in an attempt to lure foreign investors.

The system's effectiveness has yet to be proven.