Indonesia’s dream of becoming a developed nation by 2045 is taking center stage under the ambitious vision of “Indonesia Emas 2045.” As part of its strategy, the government is working relentlessly to simplify the nation’s regulatory framework. Complex and convoluted regulations are seen as one of the critical factors keeping countries from breaking free of the so-called “middle-income trap,” where economic growth stagnates.
In addressing this issue, Finance Minister Sri Mulyani Indrawati emphasized the importance of regulatory reform. “To reach the status of a high-income country, Indonesia must avoid the middle-income trap,” she stated during the National Coordination Meeting on Accelerating and Expanding Regional Digitalization in Jakarta, held on Monday, September 23, 2024.
Sri Mulyani went on to explain how the middle-income trap often manifests through excessive regulations and policies that hinder economic progress. “This trap usually appears in the form of regulations and policies that make the economy more complex and impose a greater burden on the public,” she added.
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In response to these challenges, the government, in collaboration with the DPR, passed Law No. 1 of 2022, which regulates financial relations between the central and regional governments (HKPD). The law is aimed at harmonizing central and regional government spending to create a more synchronized and impactful fiscal policy.
“This law represents a significant legislative effort to align spending and fiscal policies between the central and regional governments, ensuring that this synergy results in tangible benefits,” Sri Mulyani noted.
She expressed hope that this harmonization would lead to more effective fiscal policies, benefitting the broader public. “The HKPD Law is a key moment for reinforcing the synergy between central and regional fiscal policies,” Sri Mulyani said, underscoring the importance of a united fiscal approach for achieving the country’s goals.
By ensuring smoother coordination between central and regional governments, the government hopes that every fiscal policy will have a more direct and meaningful impact on Indonesia’s path to becoming a high-income nation by 2045.
