Indonesia will simplify licensing and offer incentives to American companies, according to Coordinating Minister for Economic Affairs Airlangga Hartarto.

This announcement comes during ongoing negotiations about reciprocal import tariffs between Indonesia and US.

A deregulation task force will be formed to assess licenses and incentives that could boost Indonesia’s business climate.

Revisions may include relaxing the Domestic Component Level (TKDN) requirement, following President Prabowo Subianto’s recent suggestion to make investment more attractive.

The US has also requested adjustments for certain products, such as data centers, which are currently under review.

🔗 Source: Antara

🧠 Food for thought

1️⃣ Indonesia’s deregulation approach follows a decades-long economic strategy pattern

Indonesia’s current deregulation efforts to attract US investment are part of a long-established economic playbook dating back to the mid-1980s.

During 1983-1996, under Suharto’s New Order, Indonesia first adopted export-led growth policies and deregulation specifically to attract foreign investment, which contributed to reducing poverty rates from over 50% to 11% by 1996 1.

The current government has been implementing similar deregulation measures to enhance business competitiveness and attract foreign investment, particularly after the COVID-19 pandemic slowed economic growth 2.

Indonesia’s approach of establishing special task forces for deregulation reflects a consistent strategy of actively engaging multinational business groups to improve the investment climate and stimulate economic growth 3.

This historical context shows that while the immediate trigger for these concessions is Trump’s tariff threat, Indonesia’s strategy of regulatory flexibility to protect strategic economic relationships aligns with its established pattern of pragmatic economic policymaking.

2️⃣ Beyond tariffs: Indonesia’s response reflects broader US strategic partnership considerations

Indonesia’s willingness to accommodate US business interests must be viewed through the lens of a strategic relationship that has been systematically upgraded over the past 15 years.

The US-Indonesia relationship was elevated from a Comprehensive Partnership in 2009 to a Strategic Partnership in 2016, reflecting both countries’ recognition of their mutual importance in regional security and economic frameworks 45.