Foreign businesses wary of extra red tape in Jakarta

JAKARTA: Foreign companies say the new Prabowo Subiantos administration's plan to expand the Cabinet risks increasing bureaucratic hurdles, which could complicate business and hurt Indonesia's investment climate, although it could help target policies if done well.

A representative of the British Chamber of Commerce in Indonesia (BritCham Indonesia) told The Jakarta Post last Friday that it is essential that any upcoming changes are structured to ease business challenges, encourage more foreign direct flows . investments and achieve the envisaged growth of 8% of gross domestic product.

While the expansion of ministries could bring concentration and potentially better governance in some sectors, it also poses risks of increased bureaucracy and regulatory complexity, said the BritCham representative, who requested anonymity. .

The government must also keep stakeholders informed so that they can adapt to the regulatory landscape and manage these changes effectively, they added. Extensive consultations with domestic and foreign chambers of commerce, for example, could be an effective way to achieve the best expected impacts of the proposals.

Similarly, Lydia Ruddy, executive director of the American Chamber of Commerce in Indonesia, told the Post that a larger cabinet could go one way or the other.

Ruddy also stressed that what is important is openness to collaboration with the private sector and good coordination.

Prabowo is due to be inaugurated on October 20.

To date, he has provided no details about the Cabinet structure or the size of his administration, either privately or publicly.

However, National Mandate Party (PAN) Chairman Zulkifli Hasan, a close ally, said Prabowo could appoint up to 44 ministers.

The 2008 Ministries Law previously imposed a limit of 34 ministries, but the House of Representatives and the administration of outgoing President Joko Jokowi Widodo agreed on September 9 to remove the cap by revising the law.

The revision bill was finalized during a plenary session of the House on September 19 and is expected to be passed as soon as the President signs it or by default after a period of 30 days.

The Finance Ministry and the House also set aside 491.22 trillion rupees, or about $32.4 billion, in a discretionary fund for the 2025 state budget to meet unforeseen expenses, including possible expansion of the Cabinet.

Deputy Finance Minister Thomas Tommy Djiwandono said last Wednesday that the budget allocation for government expansion had not been finalized but would not exceed the amount available in the discretionary fund.

Tommy, who is Prabowo's nephew, was appointed to his ministerial post in July by Jokowi, a move that was seen as easing the transition of power in October.

His comment, along with the creation of a discretionary fund and the revision of the law on ministries to abandon the cap on the number of ministries, point to a likely government expansion once Prabowo finalizes the composition of his government.

Bhima Yudhistira, executive director of the Center for Economic and Legal Studies, told the Post last Friday that it was absolutely true that a bloated government would result in additional layers of bureaucracy for businesses to conduct business in Indonesia.

Wijayanto Samirin, an economist at Paramadina University, told the Post that adding more ministries could lead to bureaucratic inefficiency and complicate coordination in the formulation and implementation of regulations, with businesses among those who would suffer. the most.

If Prabowo is not careful, licensing processes will become more complicated and time-consuming, worsening the business climate, Wijayanto said. The Jakarta Post/ANN