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Jakarta Post

BKPM annuls $23b in investment permits

The Jakarta Post
  ●   Fri, March 20, 2015

The Investment Coordinating Board (BKPM) has revoked thousands of unrealized investment permits for projects totaling US$23 billion, a measure taken for the first time in at least seven years.

The board annulled 6,541 licenses granted to foreign investors between 2007 and 2012.

The permits sat unrealized amid a host of obstacles that ranged from problems with land acquisition to the lack of supporting permits from local administrations, according to BKPM chief Franky Sibarani.

'€œWith the revocation of these permits, any firms that still carry out their businesses will be in breach of the law,'€ he said.

The so-called '€œprincipal permits'€ serve as an initial step for investors to complete their projects in Indonesia, where investment is the second-biggest driver of growth after domestic consumption. It usually takes several years for investors to realize their project after acquiring the principle permit.

Among the unrealized investments permits annulled were a $5 billion refinery project in East Java; mining projects worth $1 billion in Aceh and a $800 million smelter project in West Kalimantan, according to the BKPM.

West Java was home to the largest number of revoked licenses, followed by Greater Jakarta, Bali, East Java and Banten, according to BKPM data.

'€œ... any firms that still carry out their businesses will be in breach of the law.'€

Permits in the trade and reparation sector were the hardest hit (30 percent of revoked permits), following by mining (20 percent).

Franky added that the board would not blacklist any foreign investors whose permits were canceled, as they were allowed to reapply for new ones.

The revocation of the permits highlights the urgent need to reform the overall investment climate in Southeast Asia'€™s largest economy, which ranks 114th out of 189 nations in the World Bank'€™s Doing Business 2015 report. The global financial institution placed Indonesia in 155th place in the category of '€œsetting up a business'€ and 153rd in the category of '€œdealing with construction permits'€.

The BKPM has so far been carrying out a series of reforms aimed at addressing some of the concerns.

It has applied the One-Stop Integrated Services (PTSP) and is now trying to streamline numerous permits to cut the time it takes to acquire the permit by an average of two-thirds starting in April, a move that is expected to improve the ease of doing business in the country.

BKPM deputy head for investment monitoring and implementation Azhar Lubis said that apart from the licenses revoked by his office, as many as 310 additional permits were set to be annulled by authorities of free trade zones (FTZs).

'€œAs they are located in the FTZs, the task will be carried out by the related authorities,'€ he said.

Investment in Indonesia totaled Rp 463.1 trillion ($35.68 billion) last year, up 16.2 percent '€” a slower pace compared to increases of over 20 percent seen in the last few years.

The board has set a moderate growth target of 14 percent in realized investment for this year, of which Rp 343.7 trillion will derive from foreign investors and the rest from domestic spenders.

'€”JP/Linda Yulisman