T

he government delivered on its promise made early this month by announcing on Tuesday a second package of reform measures designed to further streamline the regulatory pipeline and clean up the rusty bureaucratic chains to smoothen economic development.

The Investment Coordinating Board (BKPM) pledged to grant permits in principle, certificates of incorporation and taxpayer registration numbers within three hours to investors as long as they plan to set up factories in industrial estates with planned investments of a minimum of Rp 100 billion (US$6.84 million) or generating at least 1,000 jobs.

The new reform measures also require the Forestry and Environment Ministry to accelerate the issuance of all licenses for exploration and production operations in forested areas from more than four years currently to only between 12 and 15 days.

Finance Minister Bambang Brodjonegoro announced that the approval time for tax allowances would be cut to a maximum of 25 days and tax holidays to 45 days and that two bonded logistics centers in Cikarang near the industrial estates in Bekasi and Merak on the western tip of West Java would soon be licensed.

As part of the measures to increase the supply of dollars, the government decided to slash the fixed income tax of 20 percent on the interest of dollar and rupiah deposits. This incentive is offered notably to businesses or people to hold their export earnings at local banks.

Companies that keep their export earnings in dollar deposits at local banks for one month will have the income tax on the deposit interest slashed from the current 20 percent to 10 percent.

Income tax will be waived for dollar deposits kept at local banks for more than six months. If the export earnings are converted into rupiah and kept in rupiah deposits at local banks their income tax will be cut from 20 percent now to 7.5 percent. Similarly, rupiah deposits of more than six months will be exempt from income tax.

The launch of the second reform package at least shows policy consistency and predictability and this will hopefully help regain market confidence in the government'€™s economic management and improve market perception that the government really has a sense of urgency and crisis that requires quick and firm decisions and action.

But experience shows that announcing reform packages is one thing and fully enforcing them is quite another. Take, for example, the investment licensing reform launched almost eight months ago whereby the BKPM was mandated to be the single gateway to all licenses required by investors from the central government.

But the blunt fact is that three important ministries '€” energy and mineral resources, transportation, fisheries and maritime affairs '€” have yet to delegate all the permits under their jurisdiction to the BKPM.

Encouragingly, Cabinet Secretary Pramono Anung has pledged that the government will see to it that regional administrations also streamline business and investment licensing to reinvigorate the economy.