Cooperation and coordination between the central and regional governments of Indonesia remains a troublesome issue in the era of decentralization in the Post-Suharto period. Obviously the implementation of uniform policies across this huge archipelago is an extremely difficult undertaking, especially because there exist a multitude of social and cultural differences between the regions. However, it is also caused by the low quality of human resources, especially at the regional level. This adds to the low awareness of regional leaders to cooperate and coordinate policies with the central authorities.

Therefore President Widodo emphasized the importance of good coordination between central and regional authorities when speaking at the Apkasi Investment Trade International Summit (AITIS) on Saturday (07/05). Widodo said it is key for overall economic growth of Southeast Asia's largest economy that the regions fully implement the content of the 12 economic policy packages that have been unveiled by the Indonesian government since September 2015. These packages deal with several matters ranging from tax incentives and deregulation to lower energy tariffs for industries and the opening up of sectors to foreign direct investment. These packages will have no effect at all if the regional authorities will not adjust their existing local regulations to the new policy changes.

Also Indonesia's Chamber of Commerce and Industry (Kadin) emphasized that local leaders should not implement new regulations that hinder investment in the regions. According to Kadin there are several regional governments that have issued new regulations that have actually undermined the policies of the recent economic policy packages. There seems to exist a notion among local authorities (or a mindset) that local revenue will decline if they adjust their local regulations to the (new) central policies, or, that the local authorities will benefit less from the new central policies compared to the central authorities.

Economic Stimulus Packages of the Indonesian Government:

Package Unveiled Main Points
1st 9 September
• Boost industrial competitiveness through deregulation
• Curtail red tape
• Enhance law enforcement & business certainty
2nd 30 September
• Interest rate tax cuts for exporters
• Speed up investment licensing for investment in industrial estates
• Relaxation import taxes on capital goods in industrial estates & aviation
3rd 7 October
• Cut energy tariffs for labor-intensive industries
4th 15 October
• Fixed formula to determine increases in labor wages
• Soft micro loans for >30 small & medium, export-oriented, labor-intensive businesses
5th 22 October
• Tax incentive for asset revaluation
• Scrap double taxation on real estate investment trusts
• Deregulation in Islamic banking
6th 5 November
• Tax incentives for investment in special economic zones
7th 4 December
• Waive income tax for workers in the nation's labor-intensive industries
• Free leasehold certificates for street vendors operating in 34 state-owned designated areas
8th 21 December
• Scrap income tax for 21 categories of airplane spare parts
• Incentives for the development of oil refineries by the private sector
• One-map policy to harmonize the utilization of land
9th 27 January
• Single billing system for port services conducted by SOEs
• Integrate National Single Window system with 'inaportnet' system
• Mandatory use of Indonesian rupiah for payments related to transportation activities
• Remove price difference between private commercial and state postal services
10th 11 February
• Removing foreign ownership cap on 35 businesses
• Protecting small & medium enterprises as well as cooperatives
11th 29 March
• Lower tax rate on property acquired by local real estate investment trusts
• Harmonization of customs checks at ports (to curtail dwell time)
• Government subsidizes loans for export-oriented small & medium enterprises
• Roadmap for the pharmaceutical industry
12th 28 April
• Enhancing the ease of doing business in Indonesia by cutting procedures, permits and costs