Jakarta – Indonesia's attractiveness as an investment destination is slipping compared with its more competitive regional rivals, according to a report released Wednesday by the World Bank's investment arm, International Finance Corp.
The report, titled Doing Business 2007, ranked Indonesia 135 out of 175 economies surveyed for their business environments. That marks a decline from 131 in 2006.
The survey, conducted from January 2005 to January 2006, rates Indonesia one of Asia's least business-friendly economies, ahead of only Cambodia, Laos and East Timor.
"(The lower ranking) isn't because of any negative reforms, in fact we've documented improvements," Caralee McLiesh, program manager and cofounder of the Doing Business Project, told reporters in a video conference. "The lesson is that (the rest of) the world is doing better... and it's not enough to just reform a bit."
The report noted that Indonesia had made significant progress in reducing the number of days required to start a new business to 97 from a previous 151. But while that is an improvement, "compare that with 33 days in Thailand and two days in Australia," McLiesh said.
"Areas that need improvement are contract enforcement, trading across borders and registering property, which all remain at the same level and continue to lag compared to its regional competitors," said Chris Richards, IFC general manager for technical assistance work in Indonesia.
The report's findings are bad news for the government of President Susilo Bambang Yudhoyono, which won a landslide election victory in October 2004 on a platform of improving the investment environment to boost economic growth.
The government has set a target of 6.6% annual economic growth from 2005 to 2009 in order to halve poverty and unemployment rates. But the economy expanded only 4.97% on year in the first half of 2006, suggesting that the official forecast of 6.2% for 2006 will be hard to meet.
Also Wednesday, the Asian Development Bank warned that its projection of 6.0% gross domestic product growth for Indonesia in 2007 hinges on the government's ability to attract investors to its infrastructure upgrade program.