During the recent meeting of interested parties involved in the “Dialogue of Multi-stakeholders in Energy and Mining” impaneled in Nusa Dua on 1-2 February 2003, the Indonesian Government and international and domestic business communities have agreed to develop and enhance an ongoing partnership to recover real investment in this critical sector.

This meeting was attended by approximately 475 participants representing businessmen from the mining and energy sectors, including representatives of the international communities and affiliated agencies. The conference was opened by President Megawati Soekarnoputri and chaired by the Coordinating Minister for Economic Affairs, Dr. Dorodjatun Kuntjororo-Jakti. Also in attendance was the Indonesian Government Minister of Finance, Minister of Interior, Minister for Forestry, Minister for the Environment, Minister for Man Power, Chairman of the Investment Board, the Chief of National Police and the Minister for Energy and Mines acting as the host.

In her welcoming address, the President hailed the dialog as a very timely and progressive step toward addressing these issues, as it augments the Government's priority agenda in 2003 in promoting investment and exports for the benefit of the Indonesian people and the economy as a whole.

During her remarks, President Megawati also stated that: “Strategic investment and exports play an important role in domestic employment development, which is crucial to the advancement of our economy and the well-being of our people". At the same time, the Government acknowledges that there are various areas of concern which may curtail investment growth within Indonesia. While these growing pains may be attributed from time-to-time to the unique transitional period from authoritarian government to a democracy that we are presently experiencing, the Government is confident that the eventual elimination of these aberrations is a certainty.

"It is therefore that the Government encourages the business community to contribute input and ideas on how to improve the investment climate in Indonesia.” Megawati said. The President recommended that a meeting of CEOs take place within six months, to be followed by an expanded, enlightened and enlarged meeting one year from now.

In his report, the Minister for Energy and Mines describes tangible successes in the energy and mining sectors. Yesterday the Government officially launched the availability of unleaded gasoline in Bali, an important part of the Government’s Blue Sky Program. This same program has been implemented in two other regions; Jakarta and Northern Java. The Government plans to gradually implement this program in rest of the country and expects full implementation by 2005.

During his address, the Minister stated that "Energy and Mines has and continues to play a major role in the economy and foreign exchange earnings, as well as taxation revenue. This sector contributes approximately 29% of the Government’s revenue, while at the same time investment in this sector is expected to reach US 5 to 6 billion, approximately 40% of total investment in Indonesia."

In addition, there were presentations by three business associations during the meeting. These were the Indonesian Petroleum Association, Electricity Power Community and the Indonesian Mining Association. Their presentations highlighted the concern of the decline in investment in these sectors, which are now being aggressively addressed. The main issues of concern, duly recognized by the Indonesian Government, are related to rules of law, local regulations, good governance, taxation administration.

Referring to the “Annual Survey of Mining Companies 2002/2003” report by the Fraser Institute, many businessmen stated that despite Indonesia’s mining potential being among the best in the world, the country attracts less than 1% of the global mining exploration budget. According to this survey, the problem is policy…not political stability or security. Indonesia is ranked the lowest from 47 countries surveyed in Policy Potential Index, despite being rated as 16th in the Mineral Potential Index.

A single case that was raised by almost all of the speakers was the prohibition of open-pit mining in a “protected forest” areas as regulated by Law number 41 introduced in 1999. This law did not stipulate mining concessions that were already given before the law was implemented. As a result, there has been a cancellation of over US$1 billion investment, and a potential loss of tens of billions dollars in new investment. Responding to this issue, the Ministers for Forestry and Environment stated that despite restrictions of law imposed by the previous government and the parliament, the present Government would like to do its utmost to see these problems resolved. As the newly democratic legislature now works with the parliament, the Government will consult the parliament in finding the right solution to this problem. It must be remembered that Indonesia is now a democracy.

A similar situation was also presented by the Minister for Man Power in responding to questions on the controversial issues stipulated by Minister Regulation number 150, specifically dealing with severance payment to workers. The Minister stated that this regulation was issued by the previous government and would be replaced by two new laws on manpower currently under deliberation by parliament. On other related issues, the Minister expressed his willingness to discuss with businessmen in this sector issues concerning manpower and ancillary issues. However, at the same time he made a strong appeal to the business community that they should not maintain a policy to retain temporary workers for years or even decades just simply to avoid minimum wage payment.

The Minister of Finance explained that special treatment could not be allocated to any specific sector, since it would distort the entire taxation system put in place. The Minister is open to discussions on comparative studies on Indonesia’s taxation system to other countries’ that would influence the level of competitiveness with regard to Indonesia.

With regard to local regulations, the Minister for the Interior has stated that the evidence suggests that local governments are quite responsive to concerns related to the present investment climate. Regarding 68 local regulations that were classified as hindering business development in various regions, 52 were cancelled voluntarily by the local governments concerned. Only 9 were cancelled by the Minister for Interior, while the rest is still in the process of review. This is ample evidence that local governments are serious in improving the investment climate in their respective regions.

The Chief of Police then took the opportunity to brief the audience on how the police prefer to take preventive and preemptive actions rather than repressive measures in dealing with security issues. It is notable that he made an appeal to businessmen to improve the effectiveness of their respective community development programs. The Chief of Police has guaranteed that he would stand ready, willing and able to augment police presence should businessmen require more personnel to protect their operations.

The Chairman of Investment Board stated that the Government is firmly commitment to protect current investments in order to avoid relocation. The Government has henceforth developed a “one roof system” of investment procedure to expedite all the processes, inquiries and concerns required by investors.

Also during the meeting, the Secretary of Tourism Ministry briefed the audience as to various policies and actions undertaken following the bombing in Bali. The latest on this issue is the release issued by World Travel Organization (WTO) that stated security condition in Indonesia has recovered, as well as the tourism capacity. Based on these developments, the Government has reviewed down the impact of the bomb on tourists arrivals this year. It is expected the number of arrivals would be down by only 2,5% much less than expected earlier. This meeting and other similar meetings in various parts of Indonesia has demonstrated that that Indonesia is relatively safe for tourism and business conventions, as safe as any other country in the world.

In concluding, The Coordinating Minister for Economic Affairs welcomes the direct dialog, in conjunction with a joint effort to promote economic recovery and stability. The investment sector is a very real and vital component of this equation.

To follow this up, the Minister has briefed his staffs to form a partnership program that will create a common understanding and shared vision between sectors and institutions of the Indonesian Government as to how to best utilize the mineral wealth of Indonesia for the economic and social development of the nation. As this vision is gradually implemented, our international partners will hopefully share their best developmental practices with us to develop a new mineral policy for Indonesia, and regulatory framework that best meets the needs of Indonesia and the world.

 Source :  The Office of the Coordinating Minister for Economic Affairs