Joko “Jokowi” Widodo’s government’s first series of Economic Policy Package (PKE) attempted to address many things at once, causing confusion as to what the Government really intended to achieve. But following the released of the First Economic Policy Package (PKE 1), the Government seemed to have regained focus. The PKEs released thereafter were more focused in nature, and it began clear that the Government look at these PKEs as products in progress. After the publication of the third package (PKE 3), the Government became even more focused, herein we go through the Fourth to the Tenth Economic Policy Package.

Fourth Economic Policy Package

The Fourth Economic Policy Package (PKE 4) focuses on the goal of providing cheaper People’s Business Credit (KUR) and making sure that KUR’s can be accessed by many. The policies issued for the purpose of achieving this goal:

  • Lowering the interest rate from 22 percent to 12 percent; and
  • Widening the scope of KUR receivers.

In addition to that, PKE 4 is also meant to improve the welfare of workers, by way of the following policies:

  1. Providing a safety net through the minimum wage policy that is calculated by a certain formula that would ensure workers are not stuck with low wages. The safety net is structured as a follow-up on the discussion of the wage system for workers that have been jammed for more than 12 years and it was finally resolved through the implementation of this package.
  2. Developing and supervising the bipartite social dialogue between employers and workers.
  3. Obligating governors to adjust the minimum wage and the Standard of Living Needs in their respective area within a maximum of 4 years and obligating employers to structure and scale workers’ wages within a period of 2 years.
  4. Starting the construction of houses and flats for workers or MBR (low-income communities).

Overall, the package revised 2 regulations involving the Coordinating Ministry for the Economy and 8 regulations involving the Ministry of Manpower.

Fifth Economic Policy Package (PKE 5)

PKE 5 aims to encourage the growth of the property sector, banking and infrastructure. Some policies produced, among others:

  • Re-evaluation of assets for tax relief;
  • Eliminating double taxation in real estate, property and infrastructure sector; and
  • Simplifying product licensing in Sharia banks.

Overall, the package revised 2 regulations involving the Ministry of Finance and 1 regulation involving OJK.

Sixth Economic Policy Package (PKE 6)

PKE 6 targets tax incentives in Special Economic Zones (KEK) and ease of investment with the aim of moving the economy in rural areas through the development of KEK. Some of the conveniences provided:

  1. Visitation visa valid for 30 days and may be extended for as many as 5 times;
  2. KEK administrator can also provide land certificates and issue principle licenses and business licenses;
  3. Foreigners can own property under certain conditions; and
  4. Reduction of income tax and tariffs in the zones.

In addition, the package is also intended to carry out a quick process (paperless) in the event of submission of import permits for raw material of medicines and provision of water to communities in a sustainable and equitable term.

With regards to water supply, the package was also attemps to follow up on the decision of the Constitutional Court in mid-2015 that granted a judicial review of the provisions of Law No. 7/2004 on Water Resources. As a result of the decision, the Constitutional Court revoked the Law and all its derivative regulations causing a legal vacuum. To address legal vacuum, the Government issued two new regulations, namely:

  1. PP No. 121/2015 on the Utilization of Water Resources; and
  2. PP No. 122/2015 on the Utilization of Water Supply System.

Overall this package revised 1 regulation involving the Coordinating Ministry for Economy, 2 regulations involving the Ministry of Public Works and People’s Housing, and 2 regulations involving the Food and Drug Supervisory Agency (BPOM).

Seventh Economic Policy Package (PKE 7)

PKE 7 focuses on providing access to easier capital for labor-intensive industries, including the industry with at least 5,000 people employed. Easy access is provided through a withholding of tax (PPh 21) to the employee who has worked for at least 2 years.

In addition, there is also ease of issuance of land certificates to owners of SMEs. According to the Government, only 40 percent of the 90.6 million parcels of land belonging to SMEs have certificate.

This package overall revised 2 regulations involving the Ministry of Finance and 3 regulations involving the Ministry of Agrarian Affairs and Spatial Planning.

Eighth Economic Policy Package (PKE 8)

PKE 8 revised 1 regulation involving Geospatial Information Agency, and directed the use of a single map scale of 1:50,000. This policy was released to reduce the overlapping use of space and land. Each Ministry/Agency are required to synchronize their data with Thematic Geospatial Information.

In addition, PKE 8 also revised 1 regulation involving the Ministry of Energy and Mineral Resources concerning the construction of new oil refineries. This policy was made because within the last 21 years Indonesia has not been able to build new oil refineries. The main objective is that there is an increase in production of oil amounted to 852 thousand barrels per day (2015) to 1.9 million barrels per day in 2025.

Another revision addressed 1 regulation involving the Ministry of Finance. This is expected to encourage business certainty in the aviation world because there are incentives in the form of 0 percent tariffs in 21 post. In addition, incentives are also given to the parts and components used in aircraft maintenance. The final goal of this policy is to encourage the production of aviation spare parts in the country.

Ninth Economic Policy Package (PKE 9)

PKE 9 revised 1 regulation involving the Ministry of Energy and Mineral Resources, 1 regulation involving the Ministry of Agriculture, 1 regulation involving the Ministry of Communication and Informatics, 2 regulations involving the Ministry of State-Owned Enterprises, and 2 regulations involving the Ministry Transportation.

Several objectives in this package are:

  • Ensuring a stable supply and prices of beef through increased of cattle population, improvement of cattle and beef trade procedures, and expanding access to supplier countries;
  • Pursuing the development of electricity infrastructure evenly to remote areas by among others resolving spatial conflicts as well as other legal issues; and
  • Accelerating logistics distribution from rural to urban areas to improve the competitiveness and economic level in the rural areas.

Tenth Economic Policy Package (PKE 10)

PKE 10 revised 1 regulation involving the Coordinating Ministry for Economy and issued Perpres No. 44/2016 regarding the List of the Closed and Opened Business Sectors with Requirements in the Field of Investment with the aim of cutting the chain of economic concentration on certain groups.

The next article will cover the Eleventh to the most recent Economic Policy Package.

By Pradnya Paramitha

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