TEMPO.CO, Jakarta - The government should not take too much comfort from the growth in the economy and the improving investment climate in Indonesia. There are still many policies that need to be put right.
As of March 2017, investment in Indonesia totaled Rp165.8 trillion, an increase of 13.2 percent over the previous year. This year, the government has set an investment target of Rp670 trillion. The government's optimism in achieving this target can be seen from its obsession with increasing investment next year to Rp840 trillion.
The government has every right to set a high target. But this has consequences in the form of guarantees of ease of doing business and better regulatory certainty. All this needs to be proved on the ground, not limited to fine words in officials' speeches. There must not be differences between spoken investment policy and its realization in regulations. This is what happened with Energy and Mineral Resources Ministerial Regulation No. 42/2017, which was criticized by energy business people. This regulation on energy business oversight was seen as shackling private enterprise.
One irrational provision in this regulation is that approval from the energy ministry is needed every time there is a change in shareholders of a corporation, or it expands or there is a change in membership of the boards of directors or commissioners. This is clearly alarming because the government appears to be intervening in private industry.
Businesspeople could decide not to go ahead with their investment plans because of regulations that constantly change or that are too restrictive. What company would want this level of interference? Government oversight should be limited to receiving reports, rather than trying to intervene in the internal affairs of companies, which should be no concern of the government.
The government has the right to intervene in the context of its role running the country, but this must be done in a way that is consistent and in line with the mechanism of the market and economic common sense. This energy ministry regulation is clearly at odds with the policy of President Joko Widodo, who has repeatedly emphasized the importance of the ease of doing business.
These strange regulations should never have been issued. Indonesia still needs significant investment to drive economic growth. In several regions, there is considerable potential for investment that remains unrealized.
These areas are rushing to come up with initiatives to attract as much investment as possible. They understand investors' needs and complaints. Therefore, there are things they need to do, such as improvements to infrastructure, guaranteeing the availability of skilled workers, simplifying the complex permit process and producing innovative regulations.
This will bring success. Even without natural resources, with regulatory innovations, economic growth will come. For example, Bintan Regency, Riau Archipelago, has been able to manage the tourism sector after removing many of the stages of the permit process. Bintan has achieved success targeting tourists from Singapore, which is only 30 kilometers away.
This regional policy initiative should not be derailed by ministerial policies that are not pro-investment. President Jokowi must keep an eye on his ministers so they do not issue arbitrary regulations.
If this is allowed to happen, the relationship between regional governments and prospective investors could be damaged. If this happens, Indonesia will be left futilely chasing its investment target.
Read the full story in this week’s edition of Tempo English Magazine
