The Jakarta Post
President Joko “Jokowi” Widodo on Monday instructed his Cabinet to focus on boosting investment by removing any barriers to doing business through deregulations, bureaucratic reforms, better cooperation and coordination with regional administrations and expanding vocational training to produce skilled workers.
We don’t want to be pessimistic, even though those reforms have been his top priorities over the past five years, and while Indonesia has remained among the least attractive places for investment in Southeast Asia.
We sense a stronger urgency in his latest instruction to his ministers. He has pledged to be more assertive and courageous to take bold reforms during his second five-year term.
He earlier referred to a plan to introduce an omnibus law, the first in the country, to accelerate the reform drive because this kind of legislation will cover diverse or unrelated topics and packages several measures into one. Since his coalition parties control the House of Representatives, we don’t foresee big problems in getting such an overarching law through the legislature.
Introducing an omnibus law will indeed be the most effective and fastest way of resolving all the problems caused by so many contradictory and overlapping laws and regulations that have so far hindered the reform program.
Boosting investment as the main objective of the overall reform is quite strategic because it is private investment, and not the government that creates jobs, which in turn generates purchasing power and alleviates poverty. More investments also generate more tax revenue for the government to finance public-sector services and investment. It is this virtuous cycle that will propel the economic wheels to generate growth.
The President’s executive order for improving cooperation and coordination between the central government and regional administrations is also strategic. Many reforms have been hampered by provincial, regency or municipal administrations which either did not understand the policies or deliberately introduced bylaws contradicting the national laws. The finance and home ministries have canceled many bylaws that were inimical to investment.
Regional administrations also play a crucial role in facilitating investment because most investment projects are outside Jakarta, the seat of the central government. Coordination and cooperation between the central government and regional administrations regarding investment and business licensing have been rather difficult since regional autonomy started in 2001.
Regional investment coordinating boards do not report nor are they accountable to the Investment Coordinating Board in Jakarta; they report to the provincial governors. The problem is that many governors often hesitate to give a full mandate to the regional investment offices to be fully in charge of investment licensing because local government leaders often use business permits as their cash cows.
The President and his ministers, notably the Home Ministry now led by former chief of the National Police Tito Karnavian, should closely monitor how regional administrations treat investors and, if necessary, should act quickly and firmly to deal with regional leaders who do not toe the central government policies and programs.