Sun, 12 Jul 2015

Indonesian politicians have done it again: flip-flopping on their policies, something that Malaysian corporations with investments in industries there, such as banking and plantations, have had to deal with before.

This time, it is with regards to the airline industry, where a stern rule was declared by ministry officials only recently requiring all airlines operating there to beef up their shareholders’ funds to move them into positive territory from negative. A deadline of July 31, 2015 was given. AirAsia Bhd’s 49% unit PT Indonesia Air Asia (IAA) requires an injection of some 3,535 billion rupiah to reverse its negative equity position. Alas, days after saying that, the officials decided to soften their stance, saying they would “help and support” these firms instead, looking to now assist, support and nurse all the airlines until their equity positions improve. Perhaps, suggestions that thousands of jobs would be lost as would foreign investments into the country influenced the softening of their stance.

But it turns out that there have been even more policy U-turns in recent times, placing pressure on Indonesian President Joko Widodo to do something about it.

Jokowi, as he is better known, had taken office in October pledging to spur an economy growing at its slowest pace in more than five years.

And Jokowi seems to have acted. According to some reports, he has directed his ministers and top officials to stop all policy U-turns. A Cabinet reshuffle is also reportedly in the offing. Recently, his Government announced and then scrapped policies, including a language test for expats, a toll road tax and a ban on Government officials meeting in hotels. Will it stop?

That’s hard to tell. For some investors, though, that is just the nature of the game in Indonesia. In other words, that’s the business risk one has to live with if you want to tap into the world’s fourth most populous country.