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Weaknesses in good regulatory practice remain a key challenge for improving government effectiveness, achieving greater coherence between different laws and regulations (both domestically and vis-à-vis other countries) and, ultimately, making it easier to do business in Indonesia.
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Poor corporate governance was identified as a major factor in Indonesia’s economic crisis in 1997. Since then a wide range of laws and regulations have been introduced and standards developed. Sound corporate governance will reassure stakeholders that their rights are protected, thus building confidence and trust in doing business in Indonesia.
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Infrastructure investment in Indonesia was seriously impaired by the 1997 Asian financial crisis. Indonesia plans to increase investment sharply through both public spending and private finance. Yet, Indonesia lacks suitable long-term investment vehicles and capital markets are still developing.
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Over the past years, Indonesia has implemented a number of trade and investment measures to develop local industries and move its firms up the value chain, but these measures have raised concerns in many of its trading partners.
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Corruption is perceived as a more severe problem in Indonesia than in many other countries. While international corruption indicators suggest some improvement, Indonesia needs to address gaps in integrity and anti-corruption laws, policies, and implementation to ensure continuing progress.
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Properly addressing the issue of food security will require an effective policy platform that can respond to a diversity of food insecurity scenarios, rather than focusing policy attention on domestic production of staple foods.
Having made impressive progress in widening access to basic education, Indonesia must now consolidate these gains and develop an education system that will support better the needs of a rapidly emerging economy in its transition towards high-income status. This report provides guidance on how Indonesia can rise to this challenge. It highlights three main policy directions which, pursued together, would help Indonesia advance on the path towards stronger growth and more inclusive and sustainable development. The first priority is to raise the quality of education and ensure that all learners acquire the skills they need to succeed in life and work. The second goal is to widen participation, requiring a concerted effort to improve access for disadvantaged groups and expand provision beyond the basic level. The final challenge is to increase efficiency, with a more data-driven approach to resource allocation, better tailoring of provision to local needs, and stronger performance management.
Indonesia can claim many economic and political achievements over the last 15 years: the country posted consistently high economic growth rates, joined the G20, stabilised its young democracy, and devolved budgetary power and decision making. Extending this track record further depends on Indonesia’s ability to deliver sustainable and sufficient energy supply to markets and ultimately to consumers.
Even though it remains a net energy exporter due to the expansion of its coal and liquid biofuel production, the country is consuming more energy as a result of rising living standards, population growth and rapid urbanisation. Indonesia is already highly dependent on oil imports. Meeting demand growth and ensuring the environmental sustainability of energy supplies must remain key pillars of its economic and investment policies and strategies.
Indonesia has implemented important changes since the IEA published its first review of the country’s energy polices in 2008. Key milestones include the 2007 Law on Energy, the 2008 National Energy Policy, the 2009 Law on Electricity, and the 2009 Law on Mineral and Coal Mining. However, the government needs to continue this reform process vigorously and implement further improvements to Indonesia’s institutional set-up, alongside stronger policy planning and implementation, more investment in critical energy infrastructure, and continued movement towards regulated energy markets and cost-reflective pricing.
This review analyses the energy policy challenges facing Indonesia and provides critiques and recommendations for further policy improvements. It is intended to help guide the country towards a more secure and sustainable energy future.
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This country note from Going for Growth 2015 for Indonesia identifies and assesses progress made on key reforms to boost long-term growth, improve competitiveness and productivity and create jobs.
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Many policy initiatives have been implemented in Indonesia, in recognition of the key role quality plays in strengthening health care systems.