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Experts call for labor, bureaucracy reforms to boost investment growth
Indonesia’s economic growth dropped to 5.02 percent year-on-year (yoy) in the third quarter, the lowest level in more than two years, with investment failing to contribute to the economy.
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A worker takes a picture of buildings in Sudirman area, Jakarta, on Oct. 25, 2017. Indonesia’s economic growth dropped to 5.02 percent year-on-year (yoy) in the third quarter, the lowest level in more than two years, with investment failing to contribute to the economy due to a global economic slowdown. (JP/Wendra Ajistyatama)
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conomists and businesspeople have urged the government to prioritize reforms in the bureaucracy and labor regulation in a bid to boost the country’s investment as recent data indicate its current initiatives are not enough to attract local and foreign investors.
The macroeconomy and trade research head at the University of Indonesia's Institute for Economic and Social Research, Febrio Kacaribu, said the government should expedite structural reform by removing red tape and improving labor regulations.
"There are too many restrictions and inefficiencies in regulations, the license procurement process and trading across borders […] The Labor Law is so rigid and costly that it has become one of the factors behind slowing [investment] growth,” Febrio told reporters in Jakarta on Monday, adding that the constant increase in the provincial minimum wage (UMP) and high severance pay discouraged labor-intensive enterprises from investing in the country.
Febrio said the government should revise the labor regulations, citing the World Bank’s Doing Business Report and the World Economic Forum’s global competitiveness index, which both considered the country's labor market to be inflexible and expensive.
The government has struggled to bring in more investment to boost slowing economic growth amid cooling household spending and weakening exports. It carried out several reforms, including a plan to revise the Labor Law, which sparked protests among workers as it was feared the amendment would loosen rules on labor protection.
Indonesia’s economic growth dropped to 5.02 percent year-on-year (yoy) in the third quarter, the lowest level in more than two years, with investment failing to contribute to the economy due to a global economic slowdown driven by a trade spat between the United States and China, according to Statistics Indonesia (BPS).
Read also: Indonesia’s GDP grows 5.02 percent in Q3, slowest in over two years
