Aditya Suharmoko, Jakarta – A recent survey that says Indonesia has become less competitive is "odd", the government has declared, pointing to improvements in business regulations and an increase in foreign investments.
Indonesia slipped from the 127th to the 129th most competitive country – out of 181 countries – in a survey conducted by the International Finance Corporation (IFC). The decline was due, in part, to a new policy requiring companies interested in opening a business to possess a minimum of Rp 12.5 million (US$1,323.59) in capital, up from Rp 5 million.
The 2009 Doing Business Report was issued Wednesday.
The government admitted to having implemented the policy, but defended it, saying it was meant to screen companies' ability to maintain businesses.
Despite the increase in the minimum capital requirement, Indonesia secured Rp 8.49 trillion in investments in the first half of 2008 – a 29.9 percent increase from last year – according to the Investment Coordinating Board (BKPM).
"The IFC's 2009 Doing Business Report was a bit odd as an improvement in three key indicators failed to raise Indonesia's ranking," the Office of the Coordinating Ministry for the Economy said in a statement released Thursday.
The statement refers to Indonesia's ability to reduce the time, costs and procedures needed to open a new business. Under the new requirements, opening an enterprise takes up to 76 days, as compared to 105 days under the old scheme.
The agency did take into account such progress, but Indonesia lagged behind most other countries who worked harder to improve their business climate, Adam Sack, IFC's country manager for Indonesia, said Thursday.
"We see, globally, many more countries working hard to improve the business environment," he added.
While Indonesia did rank well in several areas, "there are other areas where Indonesia still ranks low", which caused the country's ranking to slip two notches, Sack said.
In terms of its business climate, Indonesia is less competitive than its neighbors, according to the IFC. Singapore, for example, was first on the list, with Thailand ranked 13th, Malaysia 20th, Brunei Darussalam 88th and Vietnam 92nd. Papua New Guinea was ranked 95th.
As the report was based on the government's progress before June 1, some important programs might not have been counted, Sack added.
"Some of the benefits of those reforms, we will see in next year's indicators," he said. "It takes time for those reforms to happen... My one single recommendation is that the government continues with its planned program of reform and it keeps up the momentum and then accelerates the reform."