Fri, 18 Sep 2015

On September 9th, President Joko Widodo announced the first of three Indonesia economic policy packages to bolster economic growth amid prolonged economic slowdown and continued depreciation of the rupiah.

The stimulus package looks to revise up to 89 regulations that are considered to be hampering business development in the country. Among those to be deregulated are regulations on industrial zones and bureaucracy issues.

The Indonesia policy package, the government further elaborated, aims to achieve three goals. In particular, the package aims to boost the competitiveness of the manufacturing industries, to give more authority to regional administrations in order to reduce bottleneck problems in projects of strategic national interest, and also to boost investment in the property sector.

President Widodo and his government have been very proactive in making efforts to attract investment in various sectors and industries in Indonesia in order to achieve the seven per cent growth the government has targeted.

However, the fact that the government singled out the property sector as an investment target at a time of economic difficulty indicates it sees great promise and unfulfilled potential which can be relied upon to help revitalise the country’s struggling economy.

'Sleeping Giant'

The attention given to the property sector as a potential economic force is well overdue, according to Real Estate Indonesia (REI) deputy chairman Arthur Batubara. The property sector, he believes, has for some time been a “sleeping giant”, which potential has never been truly appreciated by previous government.

“Property used to be under the welfare ministry. It has always been looked at in terms of subsidy and providing for the underprivileged. They see it as a welfare issue. They forget that the property industry has a big role to play in our GDP,” Mr Batubara told The Establishment Post.

He added that the current government has started to recognize how important a sound property industry is to the development of other industries and the economy as a whole.

“The property sector is important for our growth. It opens up lots of jobs so it drives the economy. In fact 174 industry grows as a direct effect of the property industry. This is a point of view that we continue to convey,” he said.

In July, President Widodo agreed in principle to allow foreign ownership of property in the country. Though developers see the move as a step in the right direction in terms of attracting investment, they feel that there are still a host of regulations that needs to be revised by the government to make the property business more appealing to investors. Ciputra World 1, 2 and 3. Ciputra World is a superblock in South Jakarta.


Ciputra World 1, 2 and 3. Ciputra World is a superblock in South Jakarta. Photo courtesy SHRDT

Mr Batubara argued that for example, the industry needs clarity on the balanced residential regulation, which orders the establishment of one luxury house, be accompanied by building two middle class houses and three small houses.

“The guidance for this is not clear yet. This regulation will boost the property industry if the guidance allows us to build it in appropriate locations. We can’t build luxury houses and small houses in the same area. That comes down to zoning,” he said.

Mr Batubara said that the government has been in close communication with REI over recent regulations changes, but the association has yet to be approached regarding regulatory revisions in the economic policy package. He is confident, however, that problematic issues like zoning, as well as home savings and permits will resolved by the government in its economic policy package.

Policy Implementation Needs Monitoring

President Jokowi has recently come under some criticism for saying that the dire economy was mainly down to external factors, implying that there was little the government could do to turn the tide. Regardless of whether or not his statement was accurate, it was not something the Indonesian people like to hear from their leader.

The announcement of the Indonesia economic policy package was more along the lines what Indonesians expect from the government and the plan was generally well received by analysts and observers.

The only real concern some have raised is over the implementation of the Indonesia economic policy package. The Jokowi government has been known to be inconsistent when it comes to executing programs. The government has, on a number of occasions, reversed their own decision and policies for different reasons, which has somewhat dented their credibility and reputation.

“After the speech, the president promised to directly monitor the effectiveness of this plan on the field. This is important. Don’t let a good economic policy fail to push growth just because it has not been implemented correctly on the field,” parliament member Marwan Cik Asan told

Given the embarrassing problems the government has faced in issuing and implementing regulations, there has also been calls for the establishment of a central authority office to help the president in monitoring regulations.

“In the United States, they have an office that watches over the management of the state, like the office of information and regulatory affairs. It takes the role of a central authority that monitors government regulations,” says Nico Harjanto, director of policy research NGO Populi Center, in a discussion in Jakarta.

He said that Indonesia suffers from a lack of coordination in drafting and issuing regulations, which results in duplicate and overlapping regulations being needlessly made.

“This is because there is no central authority for regulations. That’s why this office needs to be made and under the control of the president. With a clear authority comes accountability, so it can be monitored,” he added.