JAKARTA • Indonesian President Joko Widodo yesterday unveiled plans for a "big bang" loosening of restrictions on foreign investment in nearly 50 sectors, to encourage competition in an economy dominated by powerful vested interests.
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.
South-east 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 Mr Joko told Reuters in an interview at the Presidential Palace he was very optimistic that growth in Indonesia would rebound to 5.3 per cent this year, after a slide to 4.8 per cent last year.
His trade minister, Mr Thomas Lembong, told Reuters separately that the planned overhaul of the so-called "Negative Investment List" signalled 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 the creative industry," Mr Joko said ahead of a Cabinet discussion of the proposals.
"There are 49 sub-sectors (affected), so in my opinion this is the big bang."
Mr 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 practise.
Singapore was Indonesia's largest foreign investor last year, with a 20.2 per cent share of the US$29.28 billion (S$40.8 billion) total realised investment, followed by Malaysia and Japan, the Investment Coordinating Board said last month.
The President said that, so far, he has not faced any political backlash or resistance to the steps he has taken towards liberalisation.
"For me, competition is very important," said Mr Joko, a former furniture businessman.
Data released last week showed that investment growth picked up in the last quarter of the year, thanks to rising public spending.
The final quarter also saw a jump in foreign direct investment, taking its rise for the year to 2.8 per cent in dollar terms.
The mining sector received the most inward investment, followed by transport, warehouses and telecommunications.