Esther Samboh, Jakarta – It is getting easier to start a business in Indonesia but the improvement is negated by the lack of reform in other business-related fields, including high electricity costs as indicated by a drop in the latest Doing Business index, a World Bank report, issued Thursday, shows.
Indonesia's index of doing business dropped three notches in 2012 to rank 129th out of 183 economies covered by the report, compared with 126th this year, although with positive notes in business start-up, construction permits, property registration and investors protection.
"Indonesia made starting a business easier by introducing a simplified application process allowing an applicant to simultaneously obtain both a general-trading license and a business-registration certificate," reads the report.
According to the "starting a business" index, in which Indonesia ranks 155th, it takes 45 days to start up a business in the country, going through an average of eight procedures. The government recently implemented a one-stop service for investment, aiming to process licensing in as fast as five hours or in seven days at the latest.
Local businesses, however, seemed not to agree with the improvement in starting a business. "Getting a license, especially in regions, is getting harder. This needs to be fixed by the government," said Sofjan Wanandi, chairman of the Indonesian Employers Association (Apindo).
Satria Hamid, an executive at the Indonesian Chamber of Commerce and Industry (Kadin), said lengthy bureaucracy remained a "principal issue" to ease licensing for business start-up. "For instance, 44 licenses are needed to be obtained for just one retail firm," he said. "There's a one-stop service now, but there are actually many other 'stops'."
The report also highlighted the issue of Indonesia's high electricity costs, citing data that showed that the cost of electricity for business was high at 1,379 percent of the country's income per capita. "Indonesia made getting electricity more difficult by increasing connection fees," it said. Indonesia ranks 161st in the "getting electricity" index.
Sofjan hoped that the government would not make things worse by raising base-electricity tariffs next year as planned, while Satria said associated "costs" could be even higher. "In some cases, we were told that the electricity power was not suitable, but it could be worked out after a certain 'negotiation'," Satria added.
Ahmad Erani Yustika, an economist with the Institute for Development of Economics and Finance Indonesia (INDEF), said a three-notch drop in rank was not worrying but should act as "an alarm call" to address Indonesia's classic issues of electricity supply, bureaucracy, infrastructure and human resources.
"There hasn't been a meaningful improvement on these issues," he said, calling for reforms by boosting electricity projects, making government works more efficient and easing land procurement.
Comparing regulations for domestic firms, the report covers 10 areas which affect businesses, namely: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency or closing a business.
Singapore and China ranked first and second in the index, while neighboring countries in the top 20 are Thailand (17th), Malaysia (18th) and Japan (20th).