Tuesday, 20 November 2018 00:00

The 16th Economic Policy Package Needs Central and Regional Coordination

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The government has just launched the 16th Economic Policy Package on relaxation of policies for economic resilience. In this package, there are three points that are renewed, namely expansion of facilities for reducing corporate income tax (tax holiday), relaxation of negative investment list (DNI) and optimizing utilization of export proceeds (DHE). Of the 16 sectors, there are now 18 industrial sectors that get tax incentives. What's special about this policy package? Coordinating Minister for Economic Affairs, Darmin Nasution in his announcement at the Presidential Palace in Jakarta last Friday (11/16) explained that the policy is interconnected. He added that this policy is also connected with the Online Single Submission system –OSS. With this system, once investors meet the criteria, they can immediately get incentives.

 

The main objective of the policy is to improve current account deficit -CAD. Two weeks ago, Bank Indonesia -BI announced that CAD in the third quarter of 2018 had increased, namely US$ 8.8 billion dollars equivalent to 3.37 percent of Gross Domestic Product -GDP. This value is higher than the first quarter period which reached US$ 5.7 billion dollars. Minister Darmin Nasution believed that the CAD will not exceed 3 percent after the adoption of this new policy package.

 

Minister Darmin perceived that the 16th economic policy package is medium and long term. However, there are short-term elements to strengthen the self-confidence of fund owners. He acknowledged that the problem of the Current Transaction Deficit could not be completed in 1-2 quarters. For decades, the Current Transaction Deficit was indeed a deficit.

 

Businesspeople welcomed the new economic policy package. Chairman of the Chamber of Commerce and Industry, Roesan Perkasa Roeslani said that the government is regarded appropriate to take the right time to release the policy package in a bid to respond to current economic conditions.

 

By issuing a series of economic policy packages, the government is working hard to improve economic conditions amid global uncertainty and a trade war between two super-powerful countries: China and the United States. However, this positive effort must be accompanied by comprehensive implementation in the field. Cooperation is needed, especially with regions. Regional regulations may not hinder the realization of various central economic policies. In this case, good coordination is needed between the center and the region. If not, good policies will be ineffective and it will bring about distrust among investors.

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