resident Prabowo Subianto has just installed his working cabinet, called Red and White in reference to the colors of the national flag. Consisting of 48 ministers, five agency heads and 56 deputy ministers, it is the largest cabinet Indonesia has seen since the 1998 reformation, and bigger than president Sukarno’s old order Dwikora II cabinet with 132 members in the mid-1960s.
Although such an increase in size arguably has its merits, experts, academics and even citizens have questioned its urgency and efficiency. President Prabowo’s administration now bears the responsibility for ensuring the “bloated cabinet” does not hinder investment, particularly foreign direct investment (FDI).
Investment in Indonesia is governed by Law No. 25/2007 on Investments (as amended) and the implementation is coordinated by the investment minister/Investment Coordinating Board (BKPM). The BKPM is also responsible for coordinating investment policies between ministries and agencies and is most notably known for administering the Online Single Submission (OSS) system to apply for licenses.
Ministries and agencies other than the BKPM are responsible for further regulating, administering and supervising the norms, standards, procedures and criteria concerning investment and licensing for sectors that fall under the scope of the governmental duties assigned to them. These ministries and agencies in practice are more commonly referred to as “technical ministers.” For example, the minister of public works is responsible for regulating, administering and supervising investment and licensing in construction, public works, water resources and public highways sectors.
The increase in cabinet size means having more ministries and agencies acting as lawmakers. Power and authority are now being distributed into multiple ministries and agencies, for example, in the case of a spin-off of the Law and Human Rights Ministry into 3 stand-alone ministries, namely the Law Ministry, Human Rights Ministry and Immigration and Correctional Services Ministry. Ministries and agencies are lawmakers in that they inherit power and authority to enact laws on specific matters by virtue of delegation by the hierarchy.
More lawmakers means an increase in the number of laws and regulations, which ultimately leads to “hyper-regulation,” a condition of having too many regulations that are poorly coordinated and enforced. Hyper-regulation already exists in Indonesia as evidenced by former President Joko “Jokowi” Widodo’s report in 2020 on the existence of 8,451 central government regulations and 15,985 regional government regulations. Most of these regulations conflict and overlap with one another and are poorly coordinated, thus making investment and business in Indonesia relatively difficult compared with jurisdictions like Singapore, Malaysia and Thailand.
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Back in 2020, Indonesia was ranked as the most complex jurisdiction for investment and business by the TMF Group Global Business Complexity Index 2020. Among other factors, this was largely attributed to hyper-regulation. Therefore, regulatory reforms were launched by then president Jokowi’s administration through the introduction of the Omnibus Law on job creation in 2020, which has gradually driven the nation in the right direction. This has also led to an increase in FDI and significant improvement, with Indonesia moving down to 16th place in the same report’s 2024 edition.
