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Indonesia: Economic Deregulation Planned

(Sept. 14, 2015) On September 9, 2015, Indonesia’s President Joko Widodo announced a major economic deregulation policy. According to the President, there are three areas that will be the focus of this policy: increasing the competitiveness of industry, speeding up infrastructure projects, and raising the amount invested in the property sector of the economy. Widodo stated, “[t]he government is trying to remove obstacles so as to increase industry competitiveness through de-bureaucratization and [increasing] certainty for businesses.” (Economic Deregulation Package Announced, JAKARTA POST (Sept. 9, 2015).)

The government aims to finalize all the new policies by the end of October. According to Widodo, additional packages of economic measures will be introduced following this first step. He announced the plans jointly with a number of government ministers, including Darmin Nasution, the Coordinating Economic Minister; Bambang Brodjonegoro, the Finance Minister; and Thomas Lembong, the Trade Minister. (Id.)

The main goal is to increase investment in the country; this is to be accomplished in part by a regulatory overhaul. The government has drafted 17 government and presidential regulations, two presidential instructions, 63 ministerial regulations, and five other regulations. (Id.)

In a previous discussion of the need to reform existing regulations, on September 2, 2015, the Indonesian government described the deregulation effort as “massive” and said that it would impact manufacturing, trade, and agriculture. According to Nasution, the project will involve the review of 160 existing regulations. (Wilda Asmarini, Indoneisan Leader Vows ‘Massive Deregulation’ to Win Investment, YAHOO FINANCE (Sept. 2, 2015).)

The plans also include tax holidays and a new policy on the import of beef. While the mining sector will not be deregulated, Nasution said that the government was considering opportunities to provide incentives for investors to accelerate smelter development. (Id.) Mining is an important industry in Indonesia; as of 2013 it contributed about five percent of the gross domestic product nationally and a higher proportion in some provinces. (Bernadetta Devi & Dody Prayogo, Mining and Development in Indonesia: An Overview of the Regulatory Framework and Policies, International Mining for Development Centre website (Mar. 2013).)

Widodo stressed the pressing need to improve the country’s economy, stating, “[w]e are racing against time,” and adding, “I want there to be revisions to laws that hinder anything, be it goods, services procurement or the investment climate.” (Asmarini, supra.) Indonesia has experienced four years of reduced economic growth. (Indonesia: Economy, Asian Development Bank website (2015).) One estimate puts the amount of investment from domestic or foreign sources needed to achieve Indonesia’s goal of seven percent annual growth in the economy at about US$249.33 billion; the forecast for this year is that economic growth will be under five percent, the lowest rate experienced since 2009. (Asmarini, supra.)