The Indonesian Employers Association is urging the new government to harmonize central and local regulations in a bid to improve the business climate and encourage investment.
The coordination of regulations across different levels of government is the top priority among 10 recommendations put forth by the association, which is also known as Apindo. Other priorities on its wish list include efforts to reform the bureaucracy, accelerate infrastructure development and to put proper industrial policies in place.
“Some regulations conflict with others,” Sofyan Wanandi, the chairman of Apindo, said on Wednesday. “The Mining Law overlaps with the laws on forestry and the environment, for example. And there are many regional regulations that are counterproductive and contradict national regulations.”
Improvements in the country’s investment climate over the next five years will hinge on political stability, security and legal certainty, Sofyan said.
Regulatory and legal issues are particularly problematic because of numerous issues that threaten to drive up business costs and discourage investors.
“A number of new laws and bills under consideration could cause problems for [investors],” Sofyan said.
Apindo’s view is that there is a severe lack of regulatory and legal coordination between the central government and the various ministries and regional bodies that oversee a range of specific economic issues.
The problems deepen when regional governments continue to apply regulations that the central government has already canceled. Yet little is done to address these conflicts because the central government never penalizes regional governments for ignoring its authority.
“It’s disturbing and intimidating [for investors],” Sofyan said.
Bureaucratic reform has emerged as Apindo’s second-biggest priority, because bureaucratic inefficiency - both at the central and regional levels - has significantly driven up the cost of doing business in the country.
“Excessive bureaucracy creates inefficiencies and obstacles for businesses,” Sofyan said.
Apindo has identified infrastructure as its third-biggest reform priority. Spending in this sector is still largely focused on the island of Java, while roads on other islands across the archipelago languish in a state of disrepair and basic services such as electricity remain poor. “The government has been extremely slow about addressing problems related to infrastructure,” Sofyan said. “We’ve had two infrastructure summits in a row over the past two years, but little has changed.”
The central government should address these problems by appointing professionals with industry-specific experience to ministerial posts, Sofyan said.
“It doesn’t help if ministers lack professional expertise,” he added.
“I think Mari Pangestu would do a good job as trade minister again, because she has handled export-related issues well. And Kuntoro Mangkusubroto would be a good choice for coordinating economics minister, because he already has experience.”