Directions (next 10 questions) : Read the following passage carefully and answer the questions. Certain words/phrases are given in bold to help you locate them while answering some of the questions.
Earlier this year, Indonesia’s President promised a ‘massive deregulation’ aimed at attracting foreign investment. Outsiders were thrilled. His predecessor, left the country’s business climate choking on what Adam Schwarz, a consultant, calls ‘a regulatory miasma” that strongly discouraged investment, whereas the new President, has openly courted foreign capital. Over the past six weeks his administration has unveiled a series of deregulatory measures. The government made it easier for foreigners to open bank account, struck down import restrictions on goods such as tyres and cosmetics that were designed to protect local industries, and eliminated some onerous and silly business regulations. No longer, for instance, must Indonesian-language labels be affixed to imported goods before they arrive, now they can be printed in Indonesia and attached before public circulation. The time required to process some investment permits was cut and taxes were cut for exporters who deposit foreign-exchange revenue in Indonesia or convert it into rupiah—a move to shore up the country’s wobbly currency.
These are the sort of simple, practical measures that are completely and directly felt by industry. And to its credit, Indonesia has resisted the temptation to panic in the face of a plunging currency and rising bond yields. It has, for instance, maintained fiscal discipline—aided by law that caps the budget deficit at 3%. Markets nonetheless seem unconvinced. The rupiah continued its slide after the first two announcements. It has recovered some ground this month, along with other emerging-market currencies, but has still fallen by 8% against the dollar this year. Economic growth is at its slowest since 2009. Nobody doubts the new deregulatory measures are better than nothing, but they are hardly “massive”. One foreign businessman, long resident in Indonesia, assesses them as resulting from “bureaucrats talking to themselves about how we can be a better bureaucracy rather than how we can be more receptive to foreign investment”. For the most part, the President’s new measures remove regulations that should never have been implemented in the first place. They neither fundamentally change Indonesia’s investment climate nor signal to investors that Indonesia is preparing for bigger reforms. Indonesia’s negative-investment list, which details the sectors that are barred to foreign capital, remains sizeable. Hiring foreigners is still a burdensome process : one rule requires businesses to hire ten Indonesians for every foreign worker. Businesses complain that bureaucrat pass rules hastily, without even trying to understand their effect on the private sector. A rule banning metal-ore exports remains in place and will continue to remain so; it was intended to encourage a domestic smelting industry but instead has cost thousands of jobs and billions in export revenue. Infrastructure development—the centerpiece of the President’s ambitious economic plans—has begun to pick up, but only after severe delays, and the programme remains well below its targets for this year. Perhaps most damaging is a pervasive sense of disarray. Policies are announced and then scrapped, whether because of objections that should have been aired before, as with a law to force foreigners to pass a language test, or because they conflict with other plans, as happened with a proposed road tax. Ministries seem to pass rules independently, without consulting each other or the President. Decentralisation—meaning a huge devolution of power from the national government to the regional level—may have held the country together in the early 2000s, but today it impedes infrastructure development and hinders policy co-ordination. Poor communica- tion from the President compounds these problems. The good news, as Mr. Schwarz notes, “is that country has come to an intersection and the President has said, ‘I’ve got to do something different because what we’ve been doing isn’t working.’ These bold words are welcome. But bold actions would be better still.
