Jakarta. Finance Minister Sri Mulyani Indrawati said her first month working in Indonesia's new cabinet has been "wonderful," signaling her confidence in its ability to deliver reforms that the government had promised.
President Joko "Jokowi" Widodo filled his new 36-member cabinet with members from diverse political affiliations, leading to concerns it may be unable to work efficiently.
Sri Mulyani said she used to share the same concern since in her many years in government she had witnessed many cabinet meetings ending in a stalemate thanks to members carrying different political agendas.
But she said the vibe within the cabinet is different this time, with more willingness to collaborate among the ministers clearly visible.
"The first month has been wonderful. All the ministers have been willing to work together as a team," she said with a wide smile in front of hundreds of American investors and business people at the US-Indonesia Investment Summit on Thursday.
The minister is seeking to woo investment from the US especially in the labor-intensive manufacturing and infrastructure sectors to prop up slowing growth in Indonesia.
The country has been expanding at slower rates in the past five quarters, clocking in just 5 percent in the third quarter of this year. Jokowi has made it clear he wants to boost investment at all cost to drive a growth rebound in the next few years.
Sri Mulyani promised a wealth of incentives for US investors planning to enter Indonesia, including tax breaks. So far this year the government has granted tax deductions to 140 companies that have made Rp 285 trillion ($20.3 billion) in investments.
A total of 35 foreign investors and nine local companies enjoyed tax holidays for investing a total of Rp 519 trillion in 18 strategic sectors, including agribusiness, electronic component and digital technology.
"We want you to know that we mean business," Sri Mulyani said.
Thomas Lembong, the former trade minister and former head of the Investment Coordinating Board (BKPM) during Jokowi's first term, also offered his reassurance on Jokowi's politician-heavy cabinet to the US investors.
"My take is that the technocrats already had their time. It's now the politicians' turn to pass through reforms," Thomas said, also arguing that politicians tend to be more willing to implement reforms during an economic downturn.
He said the Jokowi cabinet now has politicians from parties that make up a super majority in the House of Representatives – even Prabowo Subianto's Great Indonesia Movement Party (Gerindra), the third-largest faction in the House, is now part of the government coalition. This should make it easier for the government to pass laws.
"The most brilliant ideas from technocrats like us are useless if not legislated," Thomas said.
Several US businessmen at the summit said they were encouraged by the progress they had seen so far.
"The American business community is eager to hear the administration's plans for economic and regulatory reforms that will continue to open up Indonesia to foreign investors," Charles Freeman, the senior vice president of Asia at the US Chamber of Commerce, said in a statement.
"American companies are here and ready to invest to help Indonesia reach its ambitious development goals," Freeman said.
Several other potential investors, however, had expressed reservations, saying they would wait and see until the government make good on some of their promises.
Former BKPM head Thomas said he had advised the investors to look out for a new labor law reform in the next few months. "Yellow light should be flashing" if the government failed to pass the law in the first few months of 2020, Thomas said.
The US has been one of Indonesia's main direct investment sources, injecting close to $36 billion to Southeast Asia's largest economy from 2013 to 2017, according to a new report by AmCham Indonesia and the US Chamber of Commerce.
In comparison, China only invested $10 billion over the period.
The figures included oil and gas investment omitted from the BKPM report.
"It can be easy to sometimes downplay the incredibly important role the US plays and has played in Indonesia for decades. That is why we looked closely at the figures and the way they are calculated," said Lin Neumann, AmCham Indonesia's managing director.
AmCham Indonesia and the US Chamber of Commerce recommend four structural reforms that Indonesia should undertake to improve its business climate and encourage fair competition with foreign companies.
These are reforms that the lobby group thinks are critical if Indonesia were to achieve its 7 percent growth target.
First, the country should consult the public before issuing any regulations to ensure their effectiveness, improve compliance and reduce enforcement costs.
Second, Indonesia should establish a dedicated government body to analyze regulation impacts. The agency can help the government pinpoint unforeseen problems or unintended consequences of a regulation, as well as identify overlapping ones.
Third, the country should improve coordination and communication between government agencies and institutions.
Lastly, policymakers should fight the urge to achieve short-term gains and focus on long-term goals instead.