Indonesia Must Work Harder to Boost Competitiveness
The government of Indonesia faces a significant economic challenge. One on side, it must create 2-3 million new jobs each year. On the other hand, the state budget has always been associated with deficit. Investment then becomes a hope. However, attracting investment requires very hard work, considering the country’s lack of competitiveness.
In its report concerning the ease of doing business in 189 countries in 2015, The World Bank stated that Indonesia is only ranked 114th. This rank is way below Asian countries that are our main competitors in attracting investment, such as Thailand (26), Vietnam (78), and Philippines (95). The ranking category included the ease of starting up a business, investment procedures, time needed to start a business, cost, electricity and power, and minimum required capital.
The number of licenses and license granting institutions is still too many. In order to be granted licensing for a new business in the manufacturing sector, for instance, one would need 794 days according to prevailing laws in Indonesia.
This lack of competitiveness is also shown in the report from World Economic Forum (WEF) 2014-2015, which stated that Indonesia is only ranked 34th. WED also noted that the most problematic factor in running a business in Indonesia is corruption, with a corruption index of 15,7.
In the category of ease of doing business, still according to WEF, the aspect considered the weakest in Indonesia is legal certainty. Indonesia is only ranked 172th of 189 countries regarding this aspect.
From the analysis of The Center for Public Policy Transformation or Transformasi, based on data collected from various sources, this low rank is mainly caused by the ever high corruption in the justice system. In addition, excessive discretion of license granting officials has led to bribes.
During the last decade, since the existence of the Corruption Eradication Commission or KPK, the perceived image of corruption in Indonesia has actually gotten better. The business world has provided a positive perception. Transparency International noted that Indonesia has improved its ranking, from 114th in 2013, to 107th in 2014.
Prior to the establishment of KPK, Indonesia was often even ranked below Bangladesh. Since the birth of the commission, Indonesia has been ranked above Bangladesh, a country considered most corrupt in Asia. This is a good achievement, because other countries are also trying to wage war against corruption and making efforts to improve their ranks. Therefore, a number of recent issues that tend to weaken KPK, such as the criminalization of KPK’s commissioner and staff, and the plan to revise KPK Law by the parliament, may undermine the corruption perception of Indonesia.
In addition to consistency and strictness in eradicating corruption, there are four measures that the Government of Indonesia urgently needs to take to boost competitiveness. First, taking over the licensing authority from 22 ministries and institutions. Second, issuing all 147 licenses at the national level (excluding financing, and oil and gas). Third, conducting initial system integrated by the end of 2015 (24 provinces, 120 districts). Fourth, conducting full system integration by 2016.
Transformasi also noted that there are at least four challenges that need to be responded by the Government of Indonesia through proper policies and their implementation. First is reducing the number of licenses. Second is functioning online application and payment system. Third is transitioning smoothly from the old system to the new system. Fourth is integrating the national and local licensing system.
We have presented such analysis conducted by Transformasi related to the competitiveness situation in Indonesia in the form of an infographic. We hope that this infographic can make it easier for the people to understand the series of presented data analysis. This infographic is entitled “The Ease of Doing Business in Indonesia”, and is a summary of data gathered from various sources and from researches and studies conducted by Transformasi. This particular infographic can be downloaded at: http://transformasi.org/id/publikasi/data-dan-infographics/infographics?view=infographic&id=16.
About the Center for Public Policy Transformation (Transformasi)
Transformasi is a networked think tank that engages policy makers, scholars, and the public in the investigation of public problems. Transformasi is established and organized as a network of domestic and international institutions committed to the development and implementation of evidence based policy making by finding and implementing solutions, and monitoring and evaluation such solution results.
Transformasi underlies the policy innovation steps in Indonesia to find pragmatic and tested solutions in order to address economic and social issues. A new paradigm in public policy innovation can provide a new paradigm for real changes in Indonesia.
Public Relations Specialist