Wahyu Sudoyo & Tito Summa Siahaan – President Susilo Bambang Yudhoyono plans to revise the negative list of investment among other policies he promises to reveal on Friday, in a move to tackle slowing economic growth and calm financial markets, Coordinating Minister for the Economy Hatta Rajasa said on Thursday.

Other policies include reviewing import quotas on agricultural products in an attempt to stop the sharp depreciation in the rupiah, according to people familiar with the situation.

On the economy, even Yudhoyono himself said on Wednesday that he was not sure whether the government can achieve the 6.3 percent growth target set in the state budget, amid uncertainty in the global economy.

The main stock index slipped to an 11-month low on Thursday, and the rupiah weakened to a three-year low against the dollar.

Boosting direct investment, especially from overseas, is seen as important by the government. Poor growth performance has been visible in the second quarter when Indonesia's economic growth year-on-year slowed to 5.81 percent in the April-June period from 6.02 percent in the first quarter, partly due to slowing investment and exports amid lower global commodity prices.

Hatta said on Thursday that the revision of the list, known as DNI, is important to help attract investment and to meet the target for realized investment this year. "We have to be more competitive with rival countries. Our DNI should not be more restrictive than others," Hatta said.

In January to June, Indonesia recorded Rp 192.8 trillion ($18 billion) in investment from both foreign and domestic investors. The government is targeting Rp 390.3 trillion by the end of this year.

Foreign direct investment alone rose in the second quarter, even though the rate was lower than the previous quarter. FDI grew 19 percent year-on-year in the April-June period to Rp 66.7 trillion. That compared to 27 percent growth in the January-March period.

DNI contains at least 20 fields that are closed to FDI, including the alcoholic beverage industry, rural banks and telecommunication tower business activities.

DNI aims to protect a certain local industries or small to medium-sized enterprises, secure national assets, or close sectors perceived as having detrimental impacts on the environment as well as society.

There are, however, some sectors that are open, but with limitations as to how much foreign investors can own. For example, in the non-formal education sector, such as private education, the government sets foreign ownership at a maximum of 49 percent.

For a pharmaceutical company, the limit is 75 percent. For hospital management and health care supporting services – such as specialist medical, dental, laboratory as well as medical clinics – the maximum ownership is 67 percent.

For sectors open with a certain limitation, foreign investors usually need to set up a joint venture with at least one local partner.

Foreign investors have been waiting for this revision since at least last year, when Gita Wirjawan, who served as head of the Investment Coordinating Board (BKPM) before his current role as trade minister, was targeting revision of the DNI at the end of 2012.

On July 23, M. Chatib Basri, the finance minister who is also BKPM chief, said the agency would consider loosening investment regulations in education and health, in a bid to invite more investment.

Chatib said that if the education sector was more open to foreigners, there would be more quality private schools and universities entering Indonesia, so that parents would not have to send their children overseas.

A similar outcome is expected from the health sector, so that many wealthy people do not have to spend their dollars overseas, including Singapore and Malaysia, to get quality medical treatment.

Hatta on Thursday declined to reveal other policies aimed at tackling the current market volatility, apart from stating: "We already prepared it, on how to address the [widening] current account deficit; how to handle inflation; how to respond to the weakening rupiah."

Raising quotas on food imports or even eliminating quotas would allow importers to buy from abroad as much as needed, and that can reduce inflationary pressure.

Rising food prices was responsible for more than 40 percent of inflation last month. The consumer price index rose 8.6 percent in July from a year earlier, higher than the 5.9 percent increase in June.

"Yes, they can minimize the pressure because the source of the inflation, some of them, is from supply and not demand side. The nation has an adequate food supply. For example, through importation, it can help to reduce the pressure," said Aldian Taloputra, economist at Mandiri Sekuritas.

Fitch Ratings said on Thursday that "policy management will be the key factor in determining whether economic and financial stability is maintained in India and Indonesia following the intensified pressure on currencies and asset prices."

These new developments, though, does not trigger a call for a rating action. Fitch said Indonesia's reserves, at $93 billion at end-July, down from $106 billion a year ago, provide 4.5 months of import cover and "remain higher than residual maturity short-term debt."

Vice President Boediono, a former central bank governor, said on Thursday that Indonesia's economy was in "good hands."

He assured the public that the central bank, now led by veteran banker Agus Martowardojo, already has an effective strategy to ease the weakening rupiah trend as well as put a brake on price increases.

The central bank raised its key interest rate by a total of 75 basis points in June and July to combat inflation but kept the rate at 6.50 percent to support the economy. Higher interest rates also would make rupiah-based assets more attractive to foreign investors, but at the same time higher borrowing costs keep consumers from taking out loans.

But Aldian of Mandiri Sekuritas said: "I don't think the central bank will directly increase the rate. If they choose to increase, it will probably be on the deposit facility rate."

He added that "what will be announced tomorrow [on Friday] will be more on the fiscal side. More structural policy to help address the current account problem."

Some economists still expect the central bank to raise its benchmark rate further, as its foreign reserves have declined on intervention in the currency market.

"BI needs to hike it by 50 bps and signal a more hawkish stance. With reserves declining sharply, central bank intervention is no longer a credible policy option to anchor expectations on the rupiah," said Johanna Chua, head of Asia economics and market analysis at Citigroup.

[Additional reporting by Muhamad Al Azhari & Anushka Shahjahan.]