Following his inauguration on Wednesday, Bahlil said that President Joko “Jokowi” Widodo had ordered the newly established ministry to, essentially, implement the Job Creation Law in attracting domestic and foreign investment.

He said the ministry would promote investment in areas outside Java, simplify the permit procedures for micro, small and medium enterprises (MSMEs) and “mate” big businesses with MSMEs to foster economic growth on top of carrying out other red tape-cutting measures stipulated in the jobs law.

“The President, noting the Job Creation Law, told us that holding back someone’s permit is like holding back the national economy, employment rates, state revenue and our ease-of-doing-business ranking,” he said in a virtual press conference on Wednesday.

Bahlil’s appointment came a few weeks after the House of Representatives approved the President’s proposal to form the Investment Ministry in exchange for dissolving the Research and Technology Ministry as prevailing regulations cap the number of ministries at 34.

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The appointment marked the start of upgrading the Investment Coordinating Board (BKPM) into a ministry in a move that grants Bahlil and the agency more legal and financial power to improve the country’s investment climate.

BKPM data show that investment rose 4.3 percent annually to Rp 219.7 trillion (US$15.1 billion) in the first quarter of the year driven by a rise in foreign direct investment (FDI) as domestic investment shrunk over the same time period.

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The government began implementing the jobs law by issuing dozens of derivative regulations in February to spur investment in the coming years.

The jobs law, for instance, requires the government to launch a new online single submission (OSS) platform starting June this year that centralizes business permit processes not only for big businesses but also for small businesses.

The jobs law also enables the government to take over permit requests that have been held up in regional-level one-stop service agencies. Moreover, the law re-centralizes the right to issue location, environmental and construction permits, all of which used to be under the regional agencies.

Indonesian Center for Law and Policy Studies (PSHK) researcher Rizky Argama said that upgrading the BKPM into a ministry would ease the re-centralization process and grant the agency a larger annual budget.

“What we can say is the most significant difference is the budget,” Rizky told The Jakarta Post in a phone interview on Wednesday. “An agency’s budget usually is not as large as that of a ministry.”

The Finance Ministry slashed in January the BKPM’s budget by 13.9 percent to Rp 930 billion, which was still around double its average budget in previous years, according to local media reports.

Meanwhile, Andalas University constitutional expert Feri Amsari said that upgrading the BKPM’s legal status into a ministry granted the body more power to challenge ministerial and regional regulations (perda) deemed as inhibiting investment.

“Ministers lead ministries and directly answer to the President and their regulations are equal to other ministries,” he told the Post via text message.

He added that, while the central government could no longer revoke regional regulations, a ministerial regulation could become the legal basis to challenge regional regulations at the Supreme Court.

With a new mandate, the Investment Ministry is also expected to overcome what Bahlil has described as sectoral constraints that resulted in stalled investments.

In June last year, Bahlil said Rp 708 trillion worth of investment plans were stalled either because relevant ministries had failed to issue permits or because companies failed to acquire the needed land. So far, around 73 percent of that investment has been realized.

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“We hope the Investment Ministry can become an institution that brings together other ministries, since someone has to warn them about stalled licensing processes in other ministries and agencies,” Josua Pardede, an economist at publicly listed Bank Permata, told the Post in a separate phone interview on Wednesday.

-- Norman Harsono contributed to this story