The president's proposal, which will ease rules in the e-commerce,
retail, healthcare, movie and several other industries, could pit a
relative newcomer on the political stage against an establishment
resistant to change.
It would be the most far-reaching yet in a string of stimulus
packages rolled out over the past six months to drive industry and
employment beyond the economy's traditional mainstays of agriculture
and mineral extraction.
Southeast Asia's largest economy has been growing at its slowest
pace in six years because of falling commodity prices and cooling
growth in major trading partner China.
But Widodo told Reuters in an interview at the presidential palace
he was very optimistic that growth would rebound to 5.3 percent this
year after a slide to 4.8 percent in 2015.
His trade minister, Tom Lembong, told Reuters separately that the
planned overhaul of the so-called 'Negative Investment List"
signaled a greater openness to foreign investment and would partly
prepare the country for free trade agreements, including eventually
the Trans-Pacific Partnership (TPP).
"We are seriously considering deregulation across the board, but
focusing on e-commerce, healthcare, and creative industry," Widodo
said ahead of a cabinet discussion of the proposals.
"There are 49 sub-sectors (affected) so in my opinion this is the
Lembong said retail was also among the sectors that would be opened
up, and there would be some degree of deregulation in each of the 16
main sectors on the negative list, which include agriculture,
forestry, energy, communication and transport.
In some cases this would raise the limit on foreign stakes in
companies from a minority to a majority, helping Indonesia comply
with limits on "equity caps" stipulated under the TPP and other
trade pacts, like one under negotiation with the European Union.
The healthcare push, which would open up investment in hospitals,
clinics and laboratory services, could bring a sea-change in a
country where at present foreign medical professionals are not
allowed to practice.
Although foreign direct investment into Indonesia has risen in
recent years, it remains among the lowest in Southeast Asia in
relation to total investment and gross domestic product.
Foreign investors have pushed for years for a greater access to
opportunities in Indonesia's vast domestic market, valued at some
$840 billions at market exchange rates.
Singapore was Indonesia's largest foreign investor last year, with a
20.2 percent share of the $29.28 billion total realized investment,
followed by Malaysia and Japan, the Investment Coordinating Board
said last month.
HISTORY OF PROTECTIONISM
Indonesia has a long history of protectionism, and vested interests
have often stood in the way of trade and investment from abroad. The
last revision to the negative list was done in 2014 and was seen by
many as less investor-friendly.
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Widodo said that, so far, he has not faced any political backlash or
resistance to the steps he has taken towards liberalization.
"For me competition is very important," he said. "If we have already
launched our deregulation, the bureaucracy and the system must
follow the new rules."
Widodo's meteoric rise from furniture businessman to president of
the world's third-largest democracy - and the first to come from
outside the political or military establishment - was widely seen in
2014 as a watershed moment for Indonesia.
Supporters had predicted that the former governor of Jakarta would
root out corruption, promote people based on merit rather than
connections and create a vibrant economy.
Instead, as economic growth sagged last year, critics said he seemed
out of his depth at times and battling to get around politicians
determined to preserve the status quo.
A cabinet reshuffle last August, which brought experienced
technocrats into his team, set a new tone. Since then Widodo's
administration has rolled out nine stimulus packages cutting red
tape, offering tax breaks and loosening regulations.
Widodo said there were two prongs to his growth strategy:
deregulation to create competition, efficiency and better services,
and infrastructure development.
His government has struggled to disburse funds for roads, ports and
power stations, and many critical infrastructure projects were
hamstrung by bickering ministers and red tape.
However, data released last week showed that investment growth
picked up in the last quarter of the year thanks to rising public
The final quarter also saw a jump in foreign direct investment,
taking its rise for the year to 2.8 percent in dollar terms.
Despite the collapse in commodity prices, the mining sector saw the
most inward investment, followed by transport, warehouses and
Bank Indonesia spurred growth prospects further in January by
cutting interest rates for the first time in 11 months. Widodo said
in the interview he wanted to see rates even lower but could not
force the hand of an independent central bank.
(Additional reporting by Nicholas Owen; Editing by Simon
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