Financial Service Authority (FSA) hope the direct investment go to Indonesian financial market could reached Rp190 trillion (US$13.38 billion) in this year - Photo by CMEA Office

JAKARTA (TheInsiderStories) – Indonesian government evaluated the 16 economic policy packages has launched during the five years term of President Joko Widodo and Jusuf Kalla’ administration, said the senior official late Monday (07/15). As a result, in terms of investment, the issue of licensing still hampers the entry of investment into the largest economy in Southeast Asia.

The evaluation took place after Widodo delivered his visions for the second five-year term two days ago. Its two main visions are related to inviting the investors to the country, as well as reforming the bureaucracy, especially about licensing.

“We see it all (16 policy packages) and try to take lessons from it. But especially what we see is the problem in investment. Because investment is very important to create jobs. So we have to make it easier, not difficult,” said Coordinating Minister for Economi Affairs (CMEA) Darmin Nasution at his office after a meeting with a number of related ministers.

He explained, the efforts to increase investment in the country are still hampered by business permit issues, both in the Online Single Submission (OSS) system and at the regional level. Even though licensing is very much related to the ease of investing.

According to Nasution, there are two main problems that make the implementation of OSS not optimal. First, related to ministries and institutions that have not made norms, standards, procedures, and criteria as a guideline that really becomes a regional guideline in clarifying and affirming matters that are the authority of the regions, provinces and districts or cities.

Second, problems also exist at the local government level which is related to the implementation of the One-Stop Integrated Service system. Basically, all permissions in the area should lead to the system so that it facilitates the process of integration and synchronization of licenses with existing OSS at the central level.

Therefore, the government was thinking about the solution steps so that all permits in the area were submitted to the system as they should. However, Nasution did not explained in details what the solution is.

Meanwhile, minister of law and human rights Yasonna Laoly, said there have been as many as 353 disputes on investment licensing issues that have been reported. But of that amount, which has been completed by his side, more than half have been completed.

There are still some that have not yet been completed, later a special limited coordination meeting will be made to complete it all, he added.

Although Widodo has made progress in bureaucratic reform in some areas – such as tax collection and business permits – Indonesia still suffers from stiflingly complicated regulations and red tape over areas such as land permits and suffers from endemic corruption. Indonesia’s “negative investment list” also means that not all sectors of the economy are accessible to foreign investors.

This will be part of Widodo’ bureaucratic reform agenda in his second term, where he will continue to aim to increase the ease of doing business in Indonesia – Indonesia currently ranks 73rd globally according to the World Bank annual ratings.

Moreover, local and national regulations often overlap, making it difficult for companies to maneuver through a quagmire of bureaucracy. The erratic regulatory environment and a failure to tackle bureaucratic and legal reform during this his first term, plus poor legal certainty and ideological economic nationalism, has also meant a continuation of Indonesia’ weak competitiveness in its investment climate and limited growth.

In the first quarter of 2019, Investment Coordinating Board reported that the country recorded realization investment Rp195 trillion (US$13.93 billion). Foreign investment even fell 0.9 percent compared to the same period last year of Rp 108.9 trillion.

While Indonesia is on track to become a $2 trillion economy in the next five years and a top 10 economy by 2030 or earlier, Widodo still has his work cut out to move Indonesia from an emerging market to developed country status. Millions of Indonesians still live on the poverty line.

Growth at around 5 percent has not rapid enough in a country of 260 million people, with many young people finding it hard to get work, in part because they lack the basic vocational and practical skills to secure employment.

Widodo has pledged during the presidential campaign to create 100 million jobs in the next five years, boost spending on education, and refocus from infrastructure to human capital development.

For this reason, Widodo began in 2019 by issuing a number of fiscal policies by providing incentives to investors who want to invest in Indonesia. He offered the super deductible tax policy as one of the government’ efforts to foster a conducive business climate for the growth of the country’ industrial sector.

The government has given a large tax holiday for 5-20 years. No other country has given a maximum tax holiday until then. Also provided incentives to five industrial sectors, namely food and beverages, textiles and clothing, automotive, chemicals and electronics.

The five sectors are being prepared by the government towards Industry 4.0. The benefits of this policy for industry players include fiscal incentives tax allowances as well as tax holidays. The massive provision of fiscal incentives is expected to have an impact on Indonesia’s investment realization in the future.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com