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July 26, 2008

OECD calls on Indonesia for more liberalisation
Indonesia must raise ownership ceilings for foreign investment and liberalize state-owned monopolies to resolve infrastructure bottlenecks, local daily Jakarta Post quoted  the Organization for Economic Cooperation and Development (OECD) as saying.

The OECD on its first assessment report on the country's economy said foreign direct investment rules here are more restrictive than in most OECD countries, making Indonesia's ratio of FDI to GDP among the lowest in Southeast Asia.

"We therefore think it would be a good idea to liberalize foreign ownership restrictions further to encourage foreign investment in sectors where barriers remain," said OECD secretary-general Jose Angel Gurria.

OECD is a multilateral forum of thirty countries committed to the free market economy and the principles of representative democracy.

The report is timely as it is linked to the decision of the OECD to strengthen its cooperation with a number of important nonmember countries -- Brazil, China, India, Indonesia and South Africa -- through "enhanced engagement programs" with a chance for membership.

Gurria further said liberalising state monopolies in key industries would produce a large potential pay-off in the form of more business opportunities for the private sector and help resolve infrastructure bottlenecks.

Despite recent deregulation, he said, the government is currently still the major player in various business sectors, including manufacturing, banking and insurance, transportation and retail distribution.

"Further liberalisation will bring more investment and lower prices for consumers," he said.

However, he added, to achieve such goals there had to be an effective regulator framework that combines price liberalization and easy entry with independent regulators that can protect consumer rights.

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