Indonesia looks to attract more foreign investors by cutting red tape



President Jokowi recently announced Indonesia will remove licensing procedure formalities that have been hampering foreign investment and slowing down the country's growth.


All licensing in Indonesia is now being centralized through Indonesia's Investment Coordinating Board (BKPM). The news comes as the Jokowi administration has set its sights on improving the country's ranking in the World Bank's Ease of Doing Business index in a concerted effort to attract more direct foreign investment.

Indonesia currently ranks at #73 out of 190 in the index, which is some way behind key regional competitors Malaysia (#12) and Thailand (#21), but the administration has set an ambitious target of moving up the ranks to between #40 and #50 by 2021.

Moving in the right direction

While this would mean Indonesia would still lag behind Malaysia and Thailand it is being seen as a positive move in the right direction, especially as it pertains to attracting more foreign investment.

More sectors of Indonesia's economy are being opened up to foreign investment. Image by Tom Fisk on Pexels.

According to Bloomberg, Jokowi "will introduce sweeping changes to labour rules by the end of the year and open up more sectors of the economy to foreign investment, delivering on some of the major reforms investors have been demanding."

Streamlining OSS

Cabinet Secretary Pramono Anung is being quoted by local news wires as suggesting at least 40-ministerial regulations deemed to be hampering investment will be removed as early as this December.

Head of BKPM, Bahlil Lahadalia, believes the government's current Online Single Submission (OSS) system is not as effective as it could be because of what The Jakarta Post is calling 'overlapping authority across ministries and institutions.'

The OSS was introduced to cut red tape and speed up business licensing processes, but it has proved to be largely ineffective because of the country's infamous bureaucratic procedures.

Impact on Real Estate

Bahlil believes things will change for the better now that Jokowi has announced all licensing processes are to be centralized at BKPM.

Labuan Bajo is one destination that's on the radar for foreign investors. Image by Rina Agtiana on Pixabay.

Terje Nilsen from Harcourts Seven Stones also believes this is a positive step in the right direction, especially as it will affect the country's real estate industry. "Terminating regulations will certainly help to speed up and attract both domestic and international investors. The need for IMB's and an AMDAL*, for example, will be a lot easier and could possibly even disappear," he told WILLIAMS MEDIA.

Nilsen suggested "it will also ease up and help those investors with an appetite for tourism investments in the 10 new Bali’s, and in particular for foreigners wanting to get in early in these areas."

Note: * IMB is an acronym for Izin Mendirikan Bangunan, or Building Permit. And AMDAL is an acronym for Analisis Mengenai Dampak Lingkungan or Environmental Impact Analysis, both of which are necessary if you're building in Indonesia.

Sources: The Jakarta Post, Bloomberg, Reuters


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