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'Big bang' to open up Indonesian economy

12 Feb '16
3 min read

As Indonesia struggles to break free from a stubborn slowdown, President Joko Widodo has unveiled plans for a "big bang" loosening of restrictions on foreign investment in nearly 50 sectors of the economy to encourage competition.

Widodo's proposal, which will ease rules in e-commerce, retail, healthcare and movie industries, is the most far-reaching yet in a string of stimulus packages rolled out over the past six months to spur growth, Reuters has reported.

Indonesia's economy has been growing at its slowest pace in six years on the back of falling commodity prices and a slow growth rate in China, its major trading partner.

But Widodo said he was very optimistic that growth would rebound to 5.3 per cent this year after falling to 4.8 per cent in 2015.

"We are seriously considering deregulation across the board, but focusing on e-commerce, healthcare, and creative industry," Widodo said ahead of a cabinet discussion of the proposals.

"There are 49 sub-sectors (that will be affected) so in my opinion this is the big bang."

Indonesia has a long history of protectionism, and powerful vested interests have often stood in the way of trade and investment from abroad. The last revision to the negative list was done in 2014 and was seen by many as less investor-friendly.

Widodo said that, so far, he has not faced any political backlash or resistance to deregulation steps he has taken.

"For me competition is very important," he said. "If we have already launched our deregulation, the bureaucracy and the system must follow the new rules."

Widodo reshuffled his cabinet last August, bringing in experienced technocrats into his team. Since then Widodo's administration has rolled out nine stimulus packages cutting red tape, offering tax breaks and loosening regulations.

The President said his growth strategy is two-pronged: deregulation to create competition, efficiency and better services, and infrastructure development.

Data released last week showed that investment growth picked up in the last quarter of the year thanks to rising public spending.

The central bank spurred growth prospects in January by cutting interest rates for the first time in 11 months.

Widodo said he favoured even lower rates but conceded that he could not force the hand of an independent central bank. (SH)

Fibre2Fashion News Desk – India

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