Asia Unhedged detects more than a glimmer of hope in Indonesia.
Southeast Asia’s largest economy, is going in for a “big bang” liberalization of rules on foreign funds in about 50 sectors like e-commerce, retail, healthcare and movie.
The plans unveiled by President Joko Widodo Wednesday are aimed at making the local industry, currently dominated by vested interests who resist changes, more competitive and efficient.
The measures are expected to arrest Indonesia’s slow economic growth witnessed over the past six years and make the economy rebound to register 5.3% growth this year.
Indonesians have reason to cheer as the opening of the economy will create more jobs for them away from traditional sectors like agriculture and mineral extraction.
The proposal to revamp the so-called “negative investment list” will prepare the country for free trade agreements, including the Trans-Pacific Partnership.
Some 35 industries were removed from the list including tourism, films and restaurants.
Each of the 16 main sectors on the negative list, which include agriculture, forestry, energy, communication and transport, will undergo some degree of deregulation.
For the common man, Joko’s reform push could enhance the quality of healthcare by bringing more foreign funds to hospitals, clinics and laboratory services to acquire state-of-the-art medical facilities and top-notch professionals.
Currently, foreign medical professionals are not legally allowed to practice in the country.
However, there is concern whether the president’s reform will face opposition from political parties or resistance from vested business groups.
But Indonesia has to move from a protectionist economy to a more market-friendly one. The inward-looking policy must be given up if the country is to move forward.
Joko, who started his career in furniture business, got elected as president on promises that he would implement pro-business reforms and end crony capitalism. He has to fulfill those promises to put the country’s economy on the fast track, make it highly competitive and generate jobs to youth.