Tony Hotland, Jakarta – Aside from solving the existing problems that hamper investment, the government could also provide tax incentives for both local and foreign investors to lure them into investing their money here, a top businessman has suggested.

Indonesian Employers Association (Apindo) chairman Sofjan Wanandi said on Wednesday that the Indonesian government needed to offer tax incentives both to attract new investors and encourage existing ones to expand their businesses.

"The government says that such incentives are unnecessary. Of course, we wouldn't need them if we had a sound economy. But what about in a high-cost economy like we have here?" he said during a seminar held by consulting firm Ernst & Young.

"It could be in the form of flexibility or leeway in obtaining licenses or raw materials," Sofjan, who is also chairman of the National Economic Recovery Committee, said without further explanation.

Such incentives, he added, had been introduced by countries like Malaysia, China and Thailand.

Sofjan said tax incentives could help boost new forms of investment, both local and foreign, which had been declining in the past three years.

Currently, investment only contributes 10 percent to the country's gross domestic product as domestic consumption has been the main contributor over the past few years.

Approved year-on-year foreign investment dropped by 34 percent during the first semester to US$3.05 billion.

Sofjan also cited decentralization policies, labor issues and legal uncertainty as three of the most concerning problems faced by business players that should be seriously addressed in the draft of the new investment bill.

The new bill will be submitted to the House of Representatives for deliberation during its final session in August.

Sofjan added that Apindo, along with the Indonesian Chamber of Commerce and Industry (Kadin), was working to come up with an industry map that would provide details on the prospects of investment here.

"We'll present the draft of the map to two presidential candidates [Susilo Bambang Yudhoyono and Megawati Soekarnoputri] in August. We'll also propose that the new president hold meetings with the business community at least once every two months to talk about business issues," he said.