deregulating indonesian economic

ECONOMIC REGULATION IMPROVEMENT PROCESS IN INDONESIADeddy S Bratakusumah, Phd

2016

DEDDY S BRATAKUSUMAH, PhD - 2016

BACKGROUND

MAJOR INDICATORS:

1.SLOWER ECONOMIC GROWTH

2.LOW COMMODITY PRICES3.WEAKER INVESTMENT GROWTHS

4.INCREASING UNEMPLOYMENT AND POVERTY RATES

5.INEQUALITY HAS RISEN

GLOBAL ECONOMIC CONDITION

INDONESIA ECONOMIC CONDITION


WEAK GLOBAL GROWTH AND TRADE

SOURCE: IEQ –WORLD BANK-MARCH 2016


ECONOMIC GROWTH

SOURCE: BPS 2015


LOW COMMODITY PRICES



INVESTMENT GROWTH



POVERTY AND UNEMPLOYMENT RATES

SOURCE: BPS 2015


GINI COEFFICIENT

SOURCE: FAISALBASRI01


POLICY RESPONSE

QUICK RESPONSES

POLICIES IMPROVEMENT

(BETTER REGULATIONS)

1

2


QUICK RESPONSE STEPS

1. MACRO ECONOMIC STABILIZATION2. ESSENTIAL COMMODITY AND FUEL PRICES

CONTROL3. SPEEDING UP GOVERNMENT EXPENDITURES4. FOSTERING BIO ENERGY USAGE5. ESTABLISHING A TEAM FOR MONITORING AND

EVALUATION GOVERNMENT BUDGET EXPENDITURES6. ESTABLISHING THE PALM ESTATE FUND AGENCY7. SPEEDING UP VILLAGE FUNDS FOR “WORK FOR

FOOD PROJECTS” AND PROVIDING SUBSIDIZED RICE FOR THE POOR

8. SHIELDING THE POOR AND EMPOWERING MICRO AND SMALL ENTERPRISES THROUGH SUBSIDIZED CREDIT SCHEME

1


2 POLICIES IMPROVEMENT GOALS(BETTER REGULATIONS)

1. SOUND AND CONDUSIVE MACRO ECONOMIC POLICIES

2. ENERGIZING ECONOMIC SECTOR3. EMPOWERING SUSTAINABLE ECONOMY4. TO IMPROVE THE BUSINESS CLIMATE AND

COMPETITIVENESS5. ATTRACT HIGHER PRIVATE INVESTMENT6. DIVERSIFY THE ECONOMY, AMONG OTHERS

TOURISM7. EMPOWERING MICRO, SMALL, MEDIUM

ENTERPRISES AND COOVERATIVES8. SHIELDING THE POOR


POWER OF STATE IN INDONESIA

STATE

CURRENCY REGULATION TAXES/EXPEDITURE

MONETARY POLICY REGULATORY POLICY FISCAL POLICY

PARLIAMENT (LAWS)

EXECUTIVE (REGULATIONS)CENTRAL BANK


PROBLEMPOLICY

IMPROVEMENT URGENCY

NEW REGULATION

DRAFT

NEW REGULATION

ANALISYS RECOMMENDATION

IMPLEMENTATION

MODELLING

DECISION

PROBLEM SOLVED/ GOALS

ACHIEVED

MONITORING AND EVALUATION

REGULATION IMPROVEMENT PROCESS


REGULATORY PROBLEMS IDENTIFICATION

1. DUPLICATION, IRRELEVANT2. DISHARMONY, CONTRADICTORY AMONG

REGULATIONS3. INCONSISTENT4. UNPREDICTABLE COST AND TIME OF

LICENSE, CERTIFICATE AND PERMIT PROCESSES

5. MISCONDUCT AND CORRUPTIVE BUREAUCRACY


FLAW REGULATIONS IDENTIFIED

No REGULATION TOTAL1 GOVERNMENT REGULATION 172 PRESIDENTIAL REGULATION 113 PRESIDENTIAL INSTRUCTION 24 MINISTERIAL REGULATION 965 OTHER 8

TOTAL 134


PRESIDENT

COORDINATING MINISTER FOR

ECONOMIC AFFAIRS

MINISTRIES BUSINESS

ASSSOCIATIONS AGENCIES

COMISSIONS

REGULATORY IMPROVEMENT ACTORS

RESEARCHERS

PUBLIC OPINIONS

INVESTORS

CENTRAL BANK

FINANCIAL SERVICE

AUTHORITY (OJK)

DONORS/LENDERS


ECONOMIC STIMULUS PACKAGES

PACKAGE UNVEILED MAIN POINTS

1ST SEPTEMBER 9, 2015

• BOOST INDUSTRIAL COMPETITIVENESS THROUGH DEREGULATION• CURTAIL RED TAPE• ENHANCE LAW ENFORCEMENT & BUSINESS CERTAINTY

2ND SEPTEMBER 30, 2015

• INTEREST RATE TAX CUTS FOR EXPORTERS• SPEED UP INVESTMENT LICENSING FOR INVESTMENT IN INDUSTRIAL ESTATES• RELAXATION IMPORT TAXES ON CAPITAL GOODS IN INDUSTRIAL ESTATES & AVIATION

3RD OCTOBER 7, 2015 • CUT ENERGY TARIFFS FOR LABOR-INTENSIVE INDUSTRIES

4TH OCTOBER 15, 2015

• FIXED FORMULA TO DETERMINE INCREASES IN LABOR WAGES• SOFT MICRO LOANS FOR >30 SMALL & MEDIUM, EXPORT-ORIENTED, LABOR-INTENSIVE BUSINESSES




5TH OCTOBER 22, 2015

• TAX INCENTIVE FOR ASSET REVALUATION• SCRAP DOUBLE TAXATION ON REAL ESTATE INVESTMENT TRUSTS• DEREGULATION IN ISLAMIC BANKING

6TH NOVEMBER 5, 2015 • TAX INCENTIVES FOR INVESTMENT IN SPECIAL ECONOMIC ZONES

7TH DECEMBER 4, 2015

• WAIVE INCOME TAX FOR WORKERS IN THE NATION'S LABOR-INTENSIVE INDUSTRIES• FREE LEASEHOLD CERTIFICATES FOR STREET VENDORS OPERATING IN 34 STATE-OWNED DESIGNATED AREAS

8TH DECEMBER 21, 2015

• SCRAP INCOME TAX FOR 21 CATEGORIES OF AIRPLANE SPARE PARTS• INCENTIVES FOR THE DEVELOPMENT OF OIL REFINERIES BY THE PRIVATE SECTOR• ONE-MAP POLICY TO HARMONIZE THE UTILIZATION OF LAND




9TH JANUARY 27, 2016

• SINGLE BILLING SYSTEM FOR PORT SERVICES CONDUCTED BY SOES• INTEGRATE NATIONAL SINGLE WINDOW SYSTEM WITH 'INAPORTNET' SYSTEM• MANDATORY USE OF INDONESIAN RUPIAH FOR PAYMENTS RELATED TO TRANSPORTATION ACTIVITIES• REMOVE PRICE DIFFERENCE BETWEEN PRIVATE COMMERCIAL AND STATE POSTAL SERVICES

10TH FEBRUARY 15, 2016

• PROTECTING MICRO, SMALL, MEDIUM ENTERPRISES AND COOPERATIVES THROUGH NEGATIVE LIST INVESTMENT • INCREASING FOREIGN SHARE LIMITATION ON FDI


QUICK YIELDNo PROCESS THEN NOW1 INVESTMENT PERMITS IN

INDUSTRIAL ESTATE526 days 3 hours

2 FOREST EXPLORATION AND ENVIRONMENTAL SAFETY PERMITS

2 – 4 years

12-15 days

3 MEDICINE RAW MATERIAL IMPORT PERMITS

days 342 minutes

4 PERMITS PROCEDURES MANY AGENCIES

1 DOOR

5 TAX ALLOWANCE REQUEST - Max 25 days

6 TAX HOLIDAY REQUEST - Max 25 days

7 PORT SERVICE BILLING 1 BILL


INCENTIVESNo INCENTIVE1 TAX HOLIDAY FOR NEW INVESTOR IN ECOOMIC

ZONE, 5 TO 15 YEARS2 LOWERING INTEREST RATE FOR “SME”, FROM

22% pa TO 12% pa3 NEW FORMULA FOR WORKER SALARY4 MORE COUNTRIES WITH NO VISA POLICIES5 FOREIGNER IS ALLOWED TO HAVE PROPERTIES IN

INDONESIA6 TAX ADJUSTMENT FOR DEPOSIT INTEREST7 ELECTRICITY TARIFF ADJUSTMENT FOR SOME

INDUSTRIES8 ASSET REVALUATION FOR TAX ASSESSMENT9 SPECIAL ECONOMIC ZONE S DEVELOPMENT10 ONE MAP POLICY11 NEGATIVE LIST ADJUSTMENT


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SOURCE: CENTRAL BANK 2016

INTERNATIONAL TOURIST INFORMATION


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FDI INFORMATION

SOURCE: CENTRAL BANK 2016


REGULATION REFORM IS INTENDED TO LIFT THE CONSTRAINTS TO GROWTH IN TRADE, INVESTMENT CLIMATE, FINANCIAL MARKETS, AND SHIELDING THE POOR TOGETHER WITH EMPOWERING SME

THE REMAIN URGENT PROBLEM FOR INDONESIA IS INEQUALITY, WHICH URGE GOVERNMENT ACTION TO REDUCE IT

FINAL REMARKS


Thank YouTerima KasihGamsahabnida

deregulating indonesian economic

Government & Nonprofit