Bracing for the Hard Times

The government needs to mitigate the economic slowdown by immediately realizing its promise to increase productivity and make the economy more efficient.

KOMPAS/WAWAN H PRABOWO

President Joko “Jokowi” Widodo delivers a speech at the opening of the Kompas 100 CEO Forum 2018 at the Jakarta Convention Center (JCC) in Senayan, Jakarta, on Tuesday (27/11/2018). The Kompas 100 CEO Forum was aimed at promoting optimism ahead of the general election in 2019 and in the face of global economic instability.

When speaking to business leaders at the Kompas100 CEO Forum in Jakarta on Thursday (28/11/2019), President Joko Widodo reiterated that he would improve the investment climate. There will be a reduction in the bureaucratic chain by eliminating third echelon and fourth echelon officials without reducing employee income.

There are also two omnibus laws, namely in taxation and employment creation, to eliminate overlapping and or conflicting regulations. The harmonized regulations are expected to make Indonesia\'s investment climate more attractive to domestic and foreign business actors. The omnibus law on taxation aims to anticipate the transformation toward a digital economy and create equal business opportunities for all business actors.

This main law will cover six areas, namely lowering corporate income tax (PPh); write off dividend tax; reduction of tax penalties and interest; personal tax for people who work outside the national borders; combining all tax incentives, such as tax holidays and tax allowances into one part; and digital e-commerce tax for companies operating in the territory of Indonesia even though they do not have a permanent business entity in Indonesia.

While the omnibus law on employment creation targets 11 groups of activities, ranging from simplifying licensing, investment requirements, ease and protection of MSMEs, research and innovation support, government administration to economic zones. Indonesia\'s economic growth this year is estimated at 5.05 percent, below the 5.3 percent target, while next year\'s growth target is 5.3 percent.

KOMPAS/PRIYOMBODO

Workers unload banana stems to be produced into export scale handicrafts at CV Tashinda Putraprima in Kasihan district, Bantul, Yogyakarta, Friday (22/11/2019).

Some parties predict that the target next year will be difficult to achieve because the economies of the United States and China will slow down due to the trade war. In fact, the US economy is threatened with recession next year. Although the President encouraged all parties to remain optimistic and look for new sources of survival, citing the character in the film Cast Away who was stranded on an island after a plane crash, he said such optimism needed to accompanied by concrete steps by working hard, smart, creatively and consistently. Moreover, all countries are trying hard to increase exports and lure investment with more attractive incentives.

The government has promised to increase exports, substitute imports and attract additional foreign exchange and direct investment. Industrialization in manufacturing and mining, tourism, agriculture and fisheries are the keys to maintaining growth. Opportunities for import substitution are enormous, especially through the industrialization of local resource-based products, such as palm oil, sugar and mining products, as long as national interests are prioritized over personal and group interests.