Indonesia Investment Climate Insight
By: AMO Lawyers
Contributors:
1. Drafted by Prasetyo Maulana Nugroho S.sos
2. Reviewed by Noverizky Tri Putra Pasaribu, S.H., LL.M. (Adv)
The World Bank released on the June 2016 has released Indonesia Economic Quarterly (IEQ). The poor performance from commodity sector makes global economic has been from 2.9 percent to 2.4 percent based on from the Washington Based Institution data.
Although the current global economic was slowing down. According to World Bank Data stated Indonesian economic is good, reflected from GDP grows forecast from 5,1 percent in 2016 to 5,3 percent in 2017[1]. The World Bank recommends strong partnership between the public and private sector need to be improved by some industrial strategy for technological innovation and product development on manufacturing and service sector.
Those sectors had to be improved for reduce commodity exports dependency, which is the Indonesia economic weakness. Indonesian government has made 6-economy package for implement reformsto improve the investment climate and boost growth. These include expanding investment in public infrastructure, reducing the layers of government regulations, and opening up new areas of the economy to private investment.
Indonesian Government has taken some step to reform the partnership some industrial strategy for technological innovation and product development, which is recommended by The World Bank.
The government’s strategy to strengthen tax collection and broaden the tax base through tax reform will also generate additional revenues to pay for priority government investment. Which are Starting Business, Dealing with Construction Permit, Paying Taxes, Getting Credit, Enforcing Contract, Getting Electricity, The Trading Across Borders, the Settlement of Insolvency, and the Protection of the Minority Investors.[2] The main aim of the new economic policies is national industry competitiveness stronger. Since The World Bank since has appreciated the policies, which abovementioned, give a good impact to Indonesia’s economic resilience under the global economic slow down.
However The World Bank noted as international and domestic risk has intensified. The IEQ will depend more on private consumption. In the period ahead the private consumption in Indonesia is expected to pick up slightly. In my inflation in Indonesia is 3,3 percent, it is because The modest inflation of food prices in Indonesia is still high, while global food prices have decreased, Indonesian government should take some reform to change the policies. The outlook will depend more on private investment growth as it responds to the recent economic reform packages. The economic policy package is requires implementation and consistency from all regulatory parties for make a strong partnership between the public and private sector as well as to accelerated Indonesia competitiveness on global economic competition.
The sluggish global context is unfortunate for Indonesia because the country needs much more private investment to supply public investment as the latter has been under pressure due to weak government revenue amid weaker-than-estimated tax revenue and low commodity prices. However, the World Bank remains optimistic and claims that the current global economic context should be regarded as an opportunity as it is now the right timing for Indonesia to conduct reforms that can improve the nation’s competitiveness in manufacturing and services (the World Bank says Indonesia has enormous potential in these two areas). The deepening of industrialization will also reduce Indonesia’s traditional dependence on commodity exports.
The World Bank further stated that Indonesia needs a sound industrial strategy where emphasis is put on technological innovation, product development, hence climbing the technological ladder. This requires a strong partnership between the public and private sector.
[1] http://www.indonesia-investments.com/id/news/todays-headlines/world-bank-releases-june-2016-indonesia-economic-quarterly-report/item6939?
[2] http://www.hukumonline.com/berita/baca/lt57221f10b40fd/catat-ini-kemudahan-ukm-dalam-paket-kebijakan-xii
