E

uropean companies hope the newly passed Industry Law will provide greater business certainty and create a more conducive business climate in Southeast Asia'€™s largest economy.

The businesses said the law, which is currently being drafted by the Industry Ministry, should offer more clarity on the distribution of authority between the central government, regional administrations and relevant ministries to help create a competitive industry.

'€œThe decentralization of power is something important for businesses to know,'€ said Femke Kramer, general manager of the European Business Chamber of Commerce (EuroCham) in Indonesia, after a meeting with industry officials on Friday.

'€œThey have to know in the future who is responsible for what, where they have to go for licensing and other similar issues, as this will affect the future development of their businesses.'€

The chamber represents hundreds of European companies that operate in Indonesia and employ more than 1.1 million people in a number of industries, from manufacturing to energy generation.

In the meeting, EuroCham also highlighted regulations that could be preferential toward the so-called '€œdomestic industries'€, and asked that there be a clear definition of the term '€œdomestic'€ and its compliance with global trade rules set by the World Trade Organization (WTO).

In its recommendations to the ministry, the group raised concerns over what it considered forcible technology transfer by foreign to local companies through so-called '€œturn-key'€ projects.

The ministry defines a turn-key project as complete technology procurement from a third party, which covers a wide range of activities ranging from assessments to operations.

'€œEuroCham feels the correct promotion of technology transfer, set up in collaboration with those companies who are in vital need of this transfer, would be much more effective and ensure intellectual property rights and stimulate research and development in Indonesia,'€ the recommendation said, challenging the interpretation of turn-key projects as defined by the ministry.

The new Industry Law was passed last December, replacing the previous law that dated back to 1984.

The new law highlights a number of requirements necessary to boost growth in the country'€™s industry, such as a 20-year master plan on industrial development, industrial estate expansions and controlling the exporting of natural
resources to support domestic industry. It also aims to help the nation cope with contemporary economic challenges to amid globalization and regionalism.

The government will be issuing 19 government regulations, including presidential and ministerial regulations, to ratify the law.

In response to EuroCham'€™s concerns, expert staff member to the minister in charge of industrial structure enhancement, Achdiat Atmawinata, said the government would involve all relevant stakeholders, including foreign and local companies, in drafting the implementing regulations to accommodate their interests.

Currently, the European Union (EU) is Indonesia'€™s fourth-largest trading partner with bilateral trade totaling US$3.06 billion last year, according to Trade Ministry data. Furthermore, EU firms had spent around $2.41 billion in foreign direct investment (FDI) in the past year, according to the Investment Coordinating Board (BKPM).