Global media tycoon Steve Forbes said Indonesia could grow up to 10 percent each year if the country introduced efforts in removing barriers to doing business and cutting corporate tax, the mogul said during an address he gave in Jakarta on Friday (02/09).
The Indonesian economy is yet to return to the growth pace it enjoyed during the commodity boom five years ago, with public and private investment yet to fill the productivity gap caused by a drop in exports of commodities like coal, palm oil and raw minerals.
The economy expanded 5.2 percent in the second quarter of the year, up from 4.9 percent in the previous quarter thanks to robust household consumption. Investment growth accounted for a third of the economy although it slowed to 1.6 percent down from 1.8 percent in the previous quarter.
“There is no reason why this country should not grow real terms at 8 percent to 10 percent a year. It can be done if Indonesia starts to remove those barriers following other countries,” Forbes said.
Indonesia ranked 109 out of 189 countries in World Bank’s 2015 Ease of Doing Business Survey, moving up 11 places from a year earlier after the government eased procedures for companies to register their businesses and pay tax. Still, Indonesia lags far behind its Southeast Asian counterparts, such as Malaysia and Singapore.
President Joko “Jokowi” Widodo has targeted the country to rank at least at 40. Forbes said Indonesia should continue making breakthrough in the area — such as following New Zealand’s steps in allowing businesses to be established and registered in just a few hours —and ensure to follow it through year after year.
“Indonesia has a lot of opportunities because others have made so many mistakes. If Indonesia persists for several years, keeping the rupiah stable, reduce those tax rates, reduce the regulation, make it easier [for business leaders], [Indonesia] would be an inspiration and a model for business,” he said.
Forbes also highlighted Jokowi’s plan to cut the country’s corporate tax to 17 percent to match that in Singapore, from the current 25 percent, as a step in right direction to invigorate economic growth. Ireland keeps its corporate tax rate at 12.5 percent, which is one of the lowest in Europe, and is slated to be the fastest growing economy in the region, Forbes said. The European Commission estimated Ireland would grow 4.9 percent this year, compared to 1.8 percent growth for European Union.
The media mogul also noted US stagnation in the 70s occurred during a period of increasing corporate taxes, which ended only when then president Ronald Reagan slashed taxes during the 80s and heralded in a two decades of economic boom.
Forbes, the US-based business magazine, will hold a global conference in Jakarta Nov. 29 to Dec. 1, featuring business leaders, chief executives and other distinguished local and international guests including Investment Coordinating Board chairman Thomas Lembong and media tycoon Chairul Tandjungo.