Business community unimpressed with Jokowi’s economic stimulus

JAKARTA, Indonesia – Indonesian President Joko Widodo last week released a package of revisions to 89 regulations deemed to be detrimental to the business climate.

The regulations are aimed primarily at simplifying the process for companies to obtain business permits, streamline the bureaucracy and reduce the potential for misconduct by a notoriously corrupt government.  

The central bank also announced a set of reform policies including changing the auction mechanism for its debt-paper issuances to make them more attractive to investors and pump up liquidity.

Unfortunately, the package has been met coolly by the business community, who say the package’s impact will only be felt in the medium to long term. The Jakarta Composite Index remained flat.

“It needs to go much deeper and quicker,” said a western analyst. “Investors need changes in tax collection to rescue harassment of multinationals, clear and understandable investment incentives in the form of land and easily given tax breaks and some big-ticket wins on contract certainty,”

The World Bank’s July economic report says that Indonesia “remains confronted with an uncertain external environment, and domestic economic policy challenges have intensified.” With falling demand for Indonesian coal, crude and palm oil, policy responses have affected growth in the resource-rich provinces. The second-quarter GDP growth of 4.67 percent was the slowest pace since 2009, amid weak global commodity prices and anemic domestic spending.

The chronic current account deficit has narrowed, unfortunately not because of strong exports but because consumers have cut back on purchases because of continuing growth moderation.

Foreign direct investment and foreign deposits have both fallen, at least in part because of the recent continuing bout of economic nationalism that have made it difficult for multinationals to operate in the country – at the same time the president has been cruising Asia, pleading with investors to come in to the country.

He is due to go to Washington, DC and California in October to seek to make the case to American investors and government that the atmosphere is changing. A strong package modifying investment rules is at least partly designed to deliver an image that he is righting what so far during his presidency has been a listing ship.

Read the rest of this story on Asia Sentinel. – Rappler.com