President Joko 'Jokowi' Widodo in a cabinet meeting in Bogor Palace on Monday (29/05). (Antara photo/Puspa Perwitasari)

Jokowi: Time to Capitalize on Sovereign Credit Rating Upgrade


MAY 30, 2017

Jakarta. President Joko "Jokowi" Widodo told his ministers not to issue new regulations, especially those that that have the potential to obstruct investment, in order for the country to capitalize on Indonesia's recently raised sovereign credit rating from Standard & Poor's.

The country currently has a number of regulations to limit the quantity goods entering or exiting the country, including rice, fuel, medicine, plastic waste, explosives for imports. There are also regulations on the export of wood, gemstones and rubber.

President Jokowi also plans to revisit 23 regulations related to import and export restrictions, including Ministry of Trade regulations that allow importers and exporters to pay tariffs instead of limiting the number of goods imported or exported.

"[We need to assess] whether we still need the limited restrictions or we can change from a quota-based [system] to a tariff [based system]. This will ease the controlling [process] and will increase the state's revenue collection," he said in a plenary session at Bogor Palace on Monday (29/05).

The president's remarks came after the global credit rating agency upgraded the country's long-term sovereign credit rating to BBB-, or the lowest investment grade just above the junk rating, from BB+ previously.

The upgrade  which allows Indonesia to access a wider pool of investors and benefit from a cheaper borrowing cost for its bonds  had an overnight impact on the country's benchmark stock index. The Investment Coordinating Board, or BKPM, also estimated that Indonesia may see an additional $10 billion in foreign direct investment over the next two years after the upgrade.

"The trust shows our ability in managing the economy, our fiscal and monetary sectors," the president said in a statement on his cabinet secretary's website.

"But the most important thing is  how to [reap] the benefits from the investment grade [upgrade so that it is] felt by most people," he said.

Ministerial regulations are usually followed by more detailed rules which will complicate permit process, the president said.

According to the president, ministers can still issue new regulations if it is really necessary but it needs to be discussed first in a limited cabinet meeting between the president and the ministers involved.

Reducing overcomplicated regulations is part of the government's 14 policy packages which have been released since September 2015.

Andry Asmoro, an economist with state-owned lender Bank Mandiri, said the government should not be too fixated on the investment grade and focus on its existing policy packages instead.

"The key is to be consistent in policies on infrastructure and efforts to reduce income disparity," Andry said.

The policy packages have managed to meet some of its goals, mostly in providing much-needed infrastructure. However, simplifying regulations may not be as easy as it sounds as its success stories have yet to be heard of, Andry said.

"Investment grade gives us an opportunity as it lends us hope on a bigger investment portfolio to increase the source of financing for the programs," he said.