The government tried to reduce the current account deficit and strengthen the rupiah by issuing the 16th Economic Policy Package two weeks ago. In addition to expanding tax holiday facilities and export proceeds (DHE), the package also includes easing of negative investment list (DNI) in 54 business fields for foreign investors. However, the policy reaped controversy and criticism, including from entrepreneurs. This is the aftermath of the lack of agreement and the rush to release the DNI easing plan.
This policy package is actually intended to overcome the capital and financial transaction surplus, which declined in the third quarter of 2018. Based on data from Bank Indonesia, the surplus in the third quarter was only US$ 4.2 billion, falling significantly from US$ 10.4 billion in the same period last year. Meanwhile, the other problem is that the current account deficit rose to US$ 8.8 billion from US$ 4.3 billion.
The government also prepared a number of steps to overcome the two problems. For the current transaction problem, a mandatory policy for the use of 20 percent biodiesel was issued along with import control through an increase in the income tax from imports (pph 22 impor) and the local content requirement (TKDN) policy in government projects. “The 16th package comes out for financial transactions,” a reliable source within the government told katadata.co.id recently.
He revealed that the policy package had actually been prepared since last year, but the discussion had not been completed by the time it was issued. The government felt the policy must be issued when the Indonesian economy starts to improve as it is today.
Since the middle of the year, the rupiah exchange rate continued to weaken until it reached Rp 15,400 per USD last October. In November, the rupiah strengthened to the level of Rp 14,553 at the end of last week.
The current situation is considered as the right moment to increase investor confidence in Indonesia. In the future, Indonesia must face global challenges and political years in the country. Economic Coordinating Minister Darmin Nasution, who coordinated the issuance of the policy package, also did not want to miss the positive moment in the economy last week. After obtaining approval from President Joko “Jokowi” Widodo, he finally announced it at the State Palace on Friday (11/16).
At the time of issuing the policy, Darmin had mentioned 54 business fields that are now opened to foreign investors. However, the press conference at the Palace has not provided a full explanation, so it still has to be continued with a more detailed explanation at Darmin’s office. This time it was presented by the Secretary of the Economic Coordinating Minister Susiwijono Moegiarso and several officials from the Coordinating Ministry for Economic Affairs. However, unlike Darmin, at the time there was no detailed explanation about which business fields are now fully opened for foreign investment.
According to the source, it turned out that there were only 26 business fields that had been agreed upon by the technical ministry even though Darmin previously stated that 54 business fields were dropped from the DNI. Ahead of the issuance, several ministers decided to stop participating in the discussion, including Minister of Communications and Information Rudiantara and Minister of Trade Enggartiasto Lukita. “In the previous coordination meetings, they were very enthusiastic,” he said.
Darmin confirmed that there were business fields that had not been agreed upon by several ministers to be opened to foreigners. He even threatened to discuss it at a limited meeting (ratas) led by Jokowi, if several ministers still did not agree. “It has been discussed. There are still those [who had not agreed], one or two ministers. That is a normal thing,” Darmin said.
This turned out to be used by the opposition as a criticism to attack the Jokowi’s administration. Sandiaga Uno, vice presidential candidate with campaign number 02, sees that the government was in a panic when issuing the 16th policy package. The issuance was done when the Indonesian economy was in a bad condition. This is because economic growth has only been around 5 percent so far, while the government has promised growth of up to 7 percent.
The issuance of the policy package actually confused many parties because the new formula produced many confusing perceptions. The government previously said there was an opening for 54 business fields for foreign investment through relaxation of DNI.