A view of a busy street in Jakarta, Indonesia. The country on Wednesday announced a relaxation of business regulations aimed at attracting foreign investment. PHOTO: EUROPEAN PRESSPHOTO AGENCY

Mr. Widodo on Wednesday said the government had simplified or removed 89 regulations deemed to be hindering business and investment, including business licensing and trading permits. More deregulation would follow this month and in October, he said.

The first batch of easing “will strengthen national industry, help develop microbusinesses, facilitate trade between the regions in Indonesia and invigorate the tourism industry,” Mr. Widodo said.

The government said it would simplify the process of obtaining operating permits and access to land to help expedite strategic infrastructure projects. It would boost investment in the property sector, diversify imports of beef and cattle, and make it easier for nonresidents to open bank accounts and for tourists to get visas.

Analysts welcomed the move but said more would be needed to assure foreign businesses put off by a lack of legal certainty and policy coordination in this nation of 250 million people.

Some of the regulations investors were hoping would be loosened—such as rigid labor restrictions, import tariffs and a ban on the export of some unprocessed commodities, such as bauxite and nickel—weren’t included in Wednesday’s announcement.

Bill Sullivan, a legal adviser to many large foreign mining firms, said changes to policies were happening but not fast enough, and often failed to deliver. The government has staked a lot of credibility on “whiz-bang” stimulants, he said. But he said he doesn’t expect major overhauls.

“There will be tweaks,” Mr. Sullivan said. “But tweaks are not what people are looking for.”

The move to deregulate comes as Mr. Widodo wrestles with a faltering economy, a plunging currency and a sense among foreign investors that his reform agenda, which helped sweep him into office last year, is unfolding far more slowly than hoped.

Growth in the resource-rich country fell to 4.7% in the second quarter, hit by a decline in prices for coal, palm oil and other commodities that make up the bulk of its exports, and by slackening demand in China, the largest buyer of Indonesia’s commodities. The rupiah has slumped to its weakest level against the dollar since the Asian financial crisis of 1997-98. Bank Indonesia estimates that any one-percentage-point fall in growth in China will shave around 0.6 percentage point off Indonesia’s expansion.

An Indonesian worker mills rice at a field in Deli Serdang, North Sumatra, on Tuesday.
PHOTO: EUROPEAN PRESSPHOTO AGENCY

The government has set its sights on boosting manufacturing and value-added production to wean itself off a dependence on commodity exports. But companies complain of being stymied by regulatory obstacles, especially when dealing with provincial governments.

“We do hope that the policies, such as [obtaining licenses through one institution only] will be implemented. If these are all well implemented, I believe it will help boost investment,” said Budi Setiadi, spokesman for PetroChina International in Indonesia.

Indonesia says it will need around $400 billion over the next five years to build the roads, ports and power plants at the heart of Mr. Widodo’s plans to inject life into the economy, Southeast Asia’s largest. It expects a large chunk of that to come from foreign investors.

Mr. Widodo has stepped up efforts to get projects going and draw in more of the investment needed for infrastructure development. Last month he attended the inauguration of a planned power plant in Batang, Central Java, saying he would use a new land-acquisition law to get the long-delayed project going. Still, about 10% of the land remains to be acquired.

Some analysts say deregulation is attractive because it is easier to get rid of rules than to implement them. “So in theory it should be accomplished with mere strokes of the pen,” said Kevin O’Rourke, a policy analyst and author of the Reformasi newsletter.

What is needed, he said, is more-effective managerial control from the president. If that can happen and the government can start chipping away at some of the barriers to growth, “it will send a signal at least, if nothing else,” Mr. O’Rourke said.

Mr. Widodo shuffled his cabinet in August, bringing in Darmin Nasution, a former central-bank governor, to lead his economic team. But protectionist forces remain strong among some in the administration, say analysts, which could deter foreign investment. And mixed messages have continued to come from within the cabinet.

Destry Damayanti, chief economist at PT Bank Mandiri, said the intention and direction of the deregulation were positive because they were intended to address crucial problems.

—Ben Otto contributed to this article.

Source: www.wsj.com