Corruption Poses Extreme Risks to Indonesia's Business Sectors

Businesses in all sectors of Indonesia face extremely high risks of corruption, most notably at the district and provincial government levels, according to Maplecroft’s latest Country Risk Report on the country.

The report, with a strong focus on the garment industry, provides forward-looking analysis on the potential business implications from the expected change of government.

The leading presidential candidate Joko Widodo’s probable ascent to the presidency will mark a break from the largely clan-based power systems that have held sway in Indonesia over the last decade.

However, Maplecroft believes that Widodo’s ability to improve governance will still be constrained because of his party’s failure to secure the parliamentary majority in the April legislative elections.

The compulsions of coalition politics in Indonesia typically mean that fiscally sound but unpopular decisions such as cutting fuel subsidies and raising foreign direct investment limits in various sectors will be difficult to implement.

Despite growing political support for economic nationalism, garment manufacturing is unlikely to face the brunt of nationalist policies.

Indonesia offers inherent advantages to investors in garment production, the most notable of which is cheap labor costs.

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