Regarding the village funds, the central government aims to speed up the disbursement of these funds (through creating a new legal framework) and to stimulate productive use of the funds through incentives. In particular infrastructure development will be 'rewarded' by providing certain incentives as Southeast Asia's largest economy is still plagued by weak quality and quantity of infrastructure, hence causing high logistics costs which result in curbed competitiveness of local businesses and also leading to social problems (for example difficult access to healthcare). Irawadi said the central government may offer both fiscal and non-fiscal incentives to authorities in the villages for the use of village funds for infrastructure development.

The aforementioned new legal framework will speed up fund transfers to the village level as the central government wants to send these funds directly to the villages, instead of - as is the case currently - indirectly (through districts/cities).

Disbursement of government funds to the villages have not been optimal. Based on information from the Indonesian Finance Ministry, fund transfers from the central government to the regions have been solid in the first 10 months of the year (IDR 16.6 trillion, equivalent to 80 percent of the target set in the revised 2015 State Budget, has been transferred to the regions). However, only a small amount (approx. IDR 4.9 trillion) has been passed on - by Indonesia's 434 districts and cities - to the villages.

On Thursday (12/11), Indonesia's Chief Economics Minister Darmin Nasution will discuss the 7th stimulus package with Indonesian President Joko Widodo but it remains unclear when the new package will be officially announced and implemented.

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 to be announced • Speed up transfers of funds to the village level
• Boost infrastructure development in the villages