If you’ve ever felt frustrated by sluggish business permits, overlapping bureaucracy, or regulations that seem detached from the realities of running a business, you’re not alone. For decades, Indonesia has struggled to create a business climate that is efficient, responsive, and adaptive to the demands of a rapidly changing global economy.

Since the early 1980s, successive governments -- from the New Order to the reform era to the present administration -- have introduced numerous deregulation packages. Yet most of these efforts have been piecemeal, sectoral, or akin to a “cafeteria-style” approach, offering selective fixes without addressing the full picture.

The typical model deregulates one sector while leaving others mired in bureaucracy, ignoring how deeply interconnected modern economies are through supply chains. In business, as in economics, one broken link can disrupt the entire chain.

Fixing One Link While Ignoring the Rest
Consider this: a government might simplify production permits for manufacturers, yet retain complicated rules for importing raw materials. The result? Companies cannot manufacture efficiently, products get delayed, costs skyrocket, and competitiveness suffers. It’s like fixing one link in a chain while neglecting the others.

To make matters worse, deregulation often gets reversed over time. Rules that were simplified are quietly replaced with new layers of bureaucracy -- what should be deregulation ends up as re-regulation.

It’s Time for Supply Chain-Based Deregulation
There is a better way -- supply chain-based deregulation. The concept is straightforward but rarely applied. Instead of organizing regulations around ministries or sectors, policies should follow the entire business process from upstream to downstream.

Take agriculture as an example. Farmers are not isolated from logistics, financing, processing, distribution, domestic sales, or exports. Any disruption in one stage affects the entire system. Therefore, regulations should be designed to follow that natural flow -- from farm to fork, or factory to consumer.

In other words, governments should stop regulating based on institutional silos and start regulating based on the flow of goods and services.

The Cost of Fragmented Regulation
In today’s hyper-connected global economy, efficient supply chains are non-negotiable. Whether multinationals or small businesses, every player relies on smooth cross-border and domestic logistics.

Yet many Indonesian businesses regularly encounter conflicting regulations -- between central and local governments, or between different ministries. A single export transaction, such as in fisheries, often requires approvals from five or more agencies, each with its own rules: fishing licenses, quarantine, quality standards, transport permits, certificates of origin, and customs clearance. A delay in any one of them leads to missed deadlines and financial losses.

This Is Not About Deregulating Everything
Critically, supply chain-based deregulation is not about reckless deregulation or blind free-market policies. It’s about redesigning regulations to support efficiency and competitiveness while ensuring the government remains a strong, constructive presence.

When supply chains are integrated and digitized, regulations must be equally integrated. Fragmented, outdated rules are no longer an option.

Global Lessons Indonesia Should Learn From
Several countries offer clear proof that this approach works:

South Korea mapped entire manufacturing processes digitally, cutting irrelevant procedures. This improved logistics efficiency, attracted investment, and enabled SMEs to grow within global supply chains.

Vietnam, since joining the WTO in 2007, has aggressively simplified trade and investment regulations, particularly in electronics and textiles. In just five years, Vietnam scrapped over 3,800 permits and administrative procedures. Export-import processing time fell from 21 days (2010) to 10 days (2023). Digital reforms in customs turned Vietnam into a major electronics manufacturing hub for Samsung, LG, and Foxconn.

Rwanda, once one of Africa’s poorest nations, became a reform star by mapping every business process and digitizing permits. Starting a business there now takes just 4 days, down from 43 days in 2008. Its Rwanda Online platform integrates licensing, customs, and logistics, resulting in a surge in foreign investment.

Mexico, through its integration into NAFTA (now USMCA), streamlined industrial regulations, particularly in automotive manufacturing. Fiscal and customs deregulation in special manufacturing zones helped Mexico become a key player in the North American automotive supply chain, alongside the United States and Canada.

Indonesia’s Window of Opportunity
Indonesia has the foundation to adopt this approach. The Omnibus Law on Job Creation opened the door for regulatory simplification. The government can build on this by mapping supply chains in key sectors like food, energy, critical minerals, textiles, and electronics.

The critical next steps:

• Identify chokepoints where overlapping regulations exist -- or where regulatory gaps remain.
• Digitize licensing, standards, supervision, and incentive processes across ministries and agencies.
• Ensure these systems are interoperable, not fragmented.

Regulations Must Move as Fast as Business
The voice of the private sector is crucial. Business owners know exactly where the roadblocks are. The government must engage them -- not after regulations are drafted, but as partners in designing them.

Indonesia does not lack good ideas. What it lacks is regulatory coherence. A supply chain-driven mindset offers a paradigm shift: regulations aligned with the real economy, not ministry silos.

If Indonesia truly wants to accelerate growth, build resilience, and compete globally, its regulations must move at the speed of business. Because in the end, a nation’s competitiveness isn’t determined by who has the most resources -- but by who manages them most efficiently.

Deregulation isn’t just about cutting red tape. It’s about building an ecosystem where supply chains thrive -- and with them, the economy. A strong supply chain means a stronger Indonesia.

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Iman Pambagyo is the Trade Ministry’s Director General of International Trade Negotiations (2012-2014, 2016-2020) and Indonesia’s Ambassador to the WTO (2014-2015).

The views expressed in this article are those of the author.