Dipo Alam, Cabinet Secretary: Interview

Interview: Dipo Alam

Following decentralisation, how can long-standing bureaucratic inefficiencies be reduced, and what safeguards might prevent abuse of power?

DIPO ALAM: Parliament passed many laws during the Reformasi era, which followed the instability brought on by the 1998-99 Asian financial crisis. GDP per capita fell to just $600 as a result and there was pressure, both internally and from the IMF, to begin decentralising to fill the power vacuum left after Suharto’s rule. Since then, our strategy for targeting bureaucratic inefficiency has been to limit the ability of regency heads or governors to make their own perdas (regional regulations). Accordingly, the home affairs minister has annulled 3000 of the original 7000 perdas, prioritising those that facilitate, rather than obstruct, investment. Significant progress in licensing has also been made: over 250 districts now operate the single window system, which covers 75% of investment destinations. We are reviewing as well the regional electoral process, which is too costly and corruption prone, and whether bupatis (heads of regencies) should continue to be elected directly. Remember, though, that per-capita income is up to nearly $4000, from $1200 before the 1998 crisis, and our government budget is nearly five times bigger than in 2004. We are making progress.

What procedural improvements can be made to boost investor confidence?

ALAM: One of the major campaigns that the government has been pursuing is to “de-bottleneck” all inefficiencies in governing. Through these efforts we can provide better public services, including in the area of investment promotion. We also launched the One-Stop Service (OSS) to better facilitate foreign direct investment (FDI). Again, our fight against corruption is key to increasing our competitiveness in attracting FDI. The OSS is also aimed at streamlining the investment process that at times is delayed by various local regulations. At the national level, a policy package has been launched to improve the ease of doing business. No later than February 14, 2014, all Indonesians who want to start up a business should enjoy a faster process. More conducive policies enjoyed by local business communities will, at the same time, benefit foreign investors. In many cases, foreign investors can gain the most from their investment via partnership with local business actors.

International financial bodies question the wisdom of subsidies in Indonesia. Are they still necessary?

ALAM: Indonesia is not a purely capitalist country; we are an archipelagic nation that needs targeted subsidies to keep moving. The question is how much and how to ensure they get to the recipient efficiently. Subsidies for fertilisers, which are liable to corruption, will in future be distributed by direct cash transfer. We are working to improve Bank Rayat Indonesia, which can ensure ATM presence in only 30-40% of villages, by integrating a new satellite to cover 100% of them. As for the fuel subsidy, we feel that the amount and the way we distribute it has been clearly agreed on by parliament and will remain stable in 2014.

What is the government’s focus for the rest of its term? Any advice for future administrations?

ALAM: The central focus remains cutting unnecessary red tape to ensure investor confidence. Future administrations must continue to rigorously re-evaluate and revitalise decentralisation laws. Corruption is a by-product of centralised power being delegated to the regions in a short period of time, and we must face and conquer this for the sake of national development. The Reformasi era induced an economic jump that existing law was understandably unable to deal with. Now, reforming it must be our chief goal. Future administrations and parliaments must de-bureaucratise and deregulate to spur investment. For this to happen, future administrations must continue to work hard and be more efficient and effective. And this can be assured through cooperation with parliament. For 2013, investment will likely hit $38bn-$42bn, and in 2014, $46bn.