This handout photograph taken and released by the Indonesia's Presidential Palace on September 23, 2024 shows Joko Widodo (3L), Indonesia's President, posing after the inauguration of PT Freeport Indonesia's new copper smelter at the Java Integrated Industrial and Port Estate (JIIPE) Special Economic Zone (SEZ) in Gresik, East Java. (Photo by Indonesia's Presidential Palace/ AFP)/ RESTRICTED TO EDITORIAL USE - MANDATORY CREDIT "AFP PHOTO/ Indonesia's Presidential Palace" - NO MARKETING NO ADVERTISING CAMPAIGNS - DISTRIBUTED AS A SERVICE TO CLIENTS
JAKARTA: Foreign businesses say the plan of Prabowo Subianto’s incoming administration to expand the Cabinet risked increasing bureaucratic hurdles, which might complicate doing business and harm the investment climate in Indonesia, though it could help focus policies if done right.
A representative from the British Chamber of Commerce in Indonesia (BritCham Indonesia) told The Jakarta Post last Friday that it was critical for any upcoming changes to be structured “in a way that is perceived to ease the challenges of doing business”, to encourage more foreign direct investment and attain the envisioned 8% growth in gross domestic product.
“While the expansion of ministries could bring about focus and potentially better governance in certain sectors, it also poses risks of increased bureaucracy and regulatory complexity,” said the BritCham representative, who declined to be named.
The government also needed to keep stakeholders informed so they could “adapt to the regulatory landscape to navigate these changes effectively”, they added. “Advanced consultation with domestic and foreign business chambers, for example, could be an effective way to get the intended best impacts from the proposals.”
Likewise, Lydia Ruddy, managing director of the American Chamber of Commerce in Indonesia, told the Post that “a larger Cabinet can go either way”.
Ruddy also noted that “what is important is openness to working with the private sector and good coordination”.
Prabowo is to be inaugurated on Oct 20.
To date, he has not provided any details on the Cabinet structure or the size of his administration, either privately or publicly.
However, National Mandate Party (PAN) chairman Zulkifli Hasan, a close ally, has said Prabowo could appoint up to 44 Cabinet ministers.
The 2008 Ministries Law previously enforced a limit of 34 ministries, but the House of Representatives and the administration of outgoing President Joko “Jokowi” Widodo agreed on Sept 9 to remove the cap by revising the law.
The revision bill was finalised during a House plenary session on Sept 19, and is set 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 have also set aside 491.22 trillion rupiah or about US$32.4bil in a discretionary fund for the 2025 state budget to accommodate unplanned expenditures, including the potential Cabinet expansion.
Deputy Finance Minister Thomas “Tommy” Djiwandono said last Wednesday that the budget allocation for the Cabinet expansion “has not been finalised”, but it 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 in a move that was seen to facilitate the transition of power in October.
His comment, along with the establishment of a discretionary fund and the Ministries Law revision to jettison the cap on the number of ministries, points to a likely government expansion as soon as Prabowo finalises his Cabinet lineup.
Bhima Yudhistira, executive director of the Center of Economic and Law Studies, told the Post last Friday that “it was very true” that a bloated government would translate into extra bureaucratic layers for businesses to conduct their activities 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 formulating and implementing regulations, with businesses “among those to suffer the most”.
“If Prabowo is not careful, licensing processes will become more complicated and lengthier, and that will make our business climate worse,” Wijayanto said. — The Jakarta Post/ANN
