Evaluating Indonesia’s Policy Reform Packages

INDEF national seminar discusses impact of policy packages on the Indonesian economy

By Gilang Ardana
Tuesday, August 9, 2016

The Indonesian government’s next policy reform packages should be more focused and easily implemented, according to the mid-year economic report of the Institute for Development of Economics and Finance (INDEF), a leading local think tank.

The report launch, held on June 27 at Universitas Trilogi, opened with a keynote speech by Agus Martowardojo, Governor of Bank Indonesia, and was followed by a panel presentation consisting of INDEF Director Enny Hartati, Indonesia Investment Coordinating Board (BKPM) Deputy Farah Ratnadewi, Indonesian Chamber of Commerce (KADIN) Chairman Rosan Roeslani and Coordinating Ministry for Economic Affairs’ (CMEA) Deputy Edy Irawadi. Each speaker gave their response to INDEF’s findings.

The dozen economic packages released by the administration of President Joko Widodo was the center of discussion, with the speakers debating specific points in the packages, especially their implementation and impact on the economy.

The main finding of INDEF’s report, Evaluasi Paket, Evaluasi Ekonomi (Evaluating the Packages, Evaluating the Economy) was that the policy packages were not having a significant impact on the domestic economy.

“The impact [of the policy packages] is not visible,” said INDEF Director Enny Sri Hartati. “In the first quarter of 2016, Indonesia’s economic growth rate was under 5 percent [year-on-year], there is no significant improvement, even after the government released 10 packages.”

According to INDEF, there were too many packages, resulting in doubts that they would be implemented. The report also questioned their clarity and direct impact.

“Most of the policy packages were concerning deregulation, which means it will take a longer time to take effect. Ideally, policy packages should be implementable so the impact will be directly felt by business and the whole economy,” the report stated.

INDEF recommend that coming packages be framed within sectors, such as on industry or investment, and not be numbered. It also called for a comprehensive evaluation of the packages’ effectiveness so the government will not repeat the same mistakes.

KADIN Chairman Rosan Roeslani recommended that the next packages also should be more focused on creating jobs.

“I think we should have a big framework [for the packages] but so far I see it is more ad-hoc,” he said. “The packages should focus on creating jobs – that should be the main goal in mind before releasing the packages.”

“The packages were comprehensive, I think coming at the right time to help in solving structural challenges in our economy,” said BI Governor Agus in his keynote speech.

Agus also delivered an update on Indonesia’s economic outlook, especially as the country faces a fragile economic structure, decreasing commodity prices, income inequality and the need for a more intensive financial market.

He also made some recommendations for the government to maximize the impact of the packages.

“We think there is a need to accelerate the finishing of the package’s technical guidelines, strengthening the synergy between policy packages and governance and coordination between all stakeholders to emphasize our national interest,” he said.

Edy Irawadi from the coordinating economic ministry said that the packages were part of the government responses to the dynamic economic activities of the people. He argued that the packages created a series of investment incentives, including three-hour investment services, bonded logistic zones and revision of the negative investment list.

“The packages were part of our national economic policy scheme, focused on improving and simplifying regulations and bureaucracy and improving law enforcement,” he said. “They are also trying to rationalize our monetary, fiscal and policy regulations.”

He said the government is paying serious attention to implementation of the packages, forming the Task Force on Acceleration and Effectivity of the Implementation of National Economic Policy.  

“All of this is for the transformation of national economic policy to enhance global competitiveness,” he said.

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