Indonesian President Joko Widodo on Wednesday announced a huge economic package, including deregulation, de-bureaucratization, tax incentives, and a boost in legal certainty, to lure foreign investment and accelerate economy as rupiah weakens to 17-year lows.
Some policies will be taken to help prop up rupiah, including providing facilities for foreign citizens to open a bank account in the country, the continuation of the central bank presentation at the currency market to keep rupiah stable and the limitation in purchasing U.S. dollar.
The rupiah has weakened steadily since March amid the prospect of the U.S. Fed Reserve rate hike plan. It was traded at 14,244 per U.S. dollar on Wednesday, according to the central bank website.
President Widodo said that the government is committed to diminish all obstacles in the implementation of national strategic projects.
"These include the simplification of procedures for licensing, acceleration of land acquisitions, and discretion in settlement of (disputes) and law enforcement," Widodo told a joint press conference.
The government expects to complete all the deregulation in the packages so called the first economic package within September or October, said Widodo.
The second package will be announced at the fourth week of September and the third package in October, according to Economic Chief Minister Darmin Nasution.
To boost competitiveness of industry, tax allowance has been awarded to all processing industries and tax holiday has been given to industries at pioneering sector, Finance Minister Bambang Brodjonegoro said.
"We have generously given tax holiday for 10 to 20 years to 9 industries sectors including sector of infrastructure which has cooperation with the government," he said at the conference.
The Indonesian central bank stressed to keep effort to keep rupiah stable by continuing its presentation at the currency markets, scaling down limit to purchase foreign currency to 25,000 U.S. dollars from 100,000 U.S. dollars per person per month and smoothing approval for foreign debts of banks under prudential principle, Agus Martowardojo, governor of the bank said.
The lender has provided swap hedging facilities to support investment in infrastructures and strengthen foreign exchange reserve, he said at the conference.
The bank has refrained from loosing and kept its basic rate at 7.5 percent since February, amid prospect of the U.S. Fed Reserve rate hike plan.
Indonesia's exports have been subdued in recent months due to falling demand on the country's export products.
The country's financial service authority (OJK) will allow the opening of a bank account foreign citizen visiting Indonesia, starting next week, Muliaman Hadad, head of the OJK said at the conference on Wednesday.
As many as 10 to 12 million foreign holidaymakers come into Indonesia annually, according to the country's statistic bureau.
The biggest economy in Southeast Asia expanded the slowest pace in 6 years by 4.71 and 4.67 at the first and the second quarters.
President Widodo has trimmed gasoline subsidies and slashed travel budget for authorities to free up funds to support massive infrastructure projects to pursue his target of more than 7 percent GDP growth at the end of his 5 year tenure in 2019.