Urip Hudiono, Jakarta – While welcoming the government's most recent plan to improve the country's investment climate by reducing the time required for an investment permit to just 30 days, analysts are questioning how the government will actually implement the plan.

National Economic Recovery Commission (KPEN) chairman Sofyan Wanandi told The Jakarta Post on Tuesday that what was most important was how the Office of the Coordinating Minister for the Economy would ensure coordination between all the institutions involved in the investment process under the Investment Coordinating Board (BKPM).

"The government should particularly focus on the agencies within the Ministry of Finance and the Ministry of Trade and Industry, as well as local administrations," he said.

Under the Local Autonomy Law (No. 22/1999), local administrations headed by governors, regents and mayors have a say in all matters relating to investment within their respective jurisdictions.

Sofyan pointed out that the main problem to date was that local administrations were often reluctant to work together with the BKPM. "Their chief executives act like petty kings, and often disregard the BKPM in matters concerning investment," he said. The BKPM should therefore be given greater powers if the government really intended to reduce the current cumbersome bureaucracy, Sofyan said.

In a bid to attract badly needed foreign direct investment (FDI), Coordinating Minister for the Economy Aburizal Bakrie said last week that the government was working on cutting the time needed for investors to obtain the necessary permits to 30 days compared to 151 days at present, as revealed by a recent World Bank survey.

The government would also implement set a time limit for the approval of FDI applications, under which the application would be considered approved if the BKPM failed to give its response before the expiry of the statutory deadline.

Economist Didik J. Rachbini from the Institute for the Development of Economics and Finance (Indef) agreed with the proposal to automatically approve an investment application upon the expiry of the set time limit, saying it would encourage the various institutions involved to do their work in an efficient and timely fashion. "These institutions would be compelled to quickly process all investment applications. Otherwise, the could be accused of impeding investment into the country," he said.

Didik added however that it would be better for the government to convert the BKPM into an investment promotion agency. "Attracting investment is not just about slashing the time needed to approve investment permits," he said. "It should be more about promoting the country, including building high-level diplomatic ties with potential investor countries."

Didik also suggested that the government draw up a blacklist of local administrations that had been found to be making it difficult for investors to invest in their regions. "If they do not show any interest in attracting investors, then they should be excluded all the way," he said.

Meanwhile, analyst Umar Juoro from the Center for Information and Development Studies (CIDES) disagreed with the time limit proposal, arguing that it would be counterproductive and could cause confusion among investors.

"Normally, if an application receives no response, it means that it is rejected, not approved," he said. "Anyway, why is it so difficult for the BKPM to issue an approval or rejection on time? This, in my opinion, is the whole point of improving the functions and credibility of the BKPM."