Anushka Shah, AVP – Analyst, Sovereign Risk Group, Moody’s Investors Service Singapore Pte Ltd.
On 15 June 2017, Indonesia (Baa3 positive) announced its 15th economic policy package since September 2015, but the first since November 2016. The launch of the package is credit positive, since it signals a resumption of policy reform to improve the investment climate, following the pause since late last year.
The prior fourteen packages helped to strengthen the business environment and headline GDP growth — factors which supported our recent change in the outlook on Indonesia’s rating to positive from stable. However, there had been a lull in the government’s reform agenda, coinciding with a build-up in divisive politics surrounding elections for Jakarta’s governor earlier this year. The seven-month between policy packages underscores the continued close linkage between politics and policies.
Political hurdles and regulatory complexities posed a key bottleneck to effective policymaking early in President Joko Widodo’s term in office, but progress on reforms has indicated some headway in working around these barriers. The announcement of the latest policy package suggests that the economic reform agenda has not been derailed by political considerations.
The package seeks to provide business opportunities for national logistics providers and to improve their competitiveness by streamlining and simplifying regulations, reducing operating costs, and reducing the number of prohibited and restricted goods at ports. It also aims to strengthen the Indonesia National Single Window, an existing electronic service that facilitates customs clearance through an integrated platform.
Over time, the measures will help to reduce overall logistics costs, and support the development of domestic firms in the sector. Indonesia ranks 63rd on the World Bank’s Logistics Performance Index, which compares 160 countries on six aspects of trade logistics, below other Baa-rated peers, including India (Baa3 positive) at 35th, Thailand (Baa1 stable) at 45th, and Slovenia (Baa3 positive) at 50th.
List of Policy Package
- 9 Sept 15 Improving National Industry Competitiveness
- 29 Sept 15 Easing Permit Requirement and Simplify Export Proceeds Requirement
- 7 Oct 15 Boosting Investment, Spurring exports, maintaining people’s purchasing power
- 15 Oct 15 Simplifying Wage Formula and Expanding Loans for Small Business
- 22 Oct 15 Improving Industry and Investment Climate Through Tax incentives and Deregulation of Sharia Banking
- 5 Nov 15 Stimulating Economic Activities in Border Areas and Faciliting Strategic Commodities Avaibility
- 7 Dec 15 Stimulating Business Activities in labor-intensive industries Nation-wide Through Incentives in the Form of Accelerating Land Certification Process for Individuals
- 21 Dec 15 Resolving Land Acquisition Disputes, Intensifying Domestic Oil Production, Stimulating Domestic Parts and Aviation Industries
- 27 Jan 16 Accelerating Electricity Generation, Stabilizing Meat Prices and Improving Rural-urban Logistics Sector
- 11 Feb 16 Revising the Negative Investment List and Improving Protection for SMEs
- 29 Mar 16 Stimulating National Economy Through Faciliation to SMEs and Industries
- 28 Apr 16 Improving Indonesia’s rank of Ease of Doing Business
- 24 Aug 16 Low Cost Housing for Low-Income Communities
- 10 Nov 16 Roadmap for E-commerce
- 15 Jun 17 Roadmap to Improve Logistic
Sources: Bank Indonesia