More than six months after President Joko "Jokowi" Widodo's administration launched the one-stop integrated investment services (PTSP) in Jakarta, business-licensing processes remain lengthy and complicated, a study by the Asian Development Bank and Regional Autonomy Watch (KPPOD) in five major cities has concluded.
The conclusion, announced on Monday, simply confirmed the findings of the latest annual survey called "The Ease of Doing Business Index" report of the World Bank, which ranked Indonesia at 114th out of 185 countries studied mainly due to complicated licensing and procedures for starting up business.
On the same day the ADB-KPPOD study report was revealed, President Jokowi himself conceded at a meeting with economics editors "we are trapped in excessive procedures and licensing systems". He added that his office and the chamber of commerce had listed more than 130 regulations affecting business operations for a comprehensive review.
On Tuesday, the Centre for Strategic and International Studies (CSIS) announced the findings of its study on special economic zones (SEZ), showing that at only two of the eight SEZ decreed by the government have operations started.
One is the tourism-centered SEZ in Tanjung Lesung in West Java and the other is the palm oil-based SEZ at Semangke in North Sumatra. But even the Semangke SEZ has only two factories already in operation. Worse still, most of the basic infrastructure, such as rail links and access roads to the nearby Kuala Tanjung seaport, has yet to be built.
The main problems are the same: excessive regulations, complicated licensing procedures and acute lack of inter-ministerial coordination. The Law on SEZ that was enacted in early 2009 seems ineffective in accelerating SEZ development.
Indeed, whenever it comes to licensing authority, inter-ministerial coordination has been most challenging in the country because the various ministries and government agencies always fight hard, sometimes overzealously, to defend their respective turf without regard to the bigger national goal.
The blunt fact is that within the government bureaucracy, notorious for being one of the most corrupt in the world, licensing authority often serves as a gold mine for rent seekers.
Jokowi fully understands the frustration and the pain suffered by businesspeople in obtaining all the necessary permits to start up a business. He generated a great deal of optimism when he made reform of the investment licensing system one of his top priorities. But it turns out that reform is not that simple because every measure has to be thoroughly assessed to ascertain the new measures do not violate existing laws and regulations, the number of which is quite excessive.
Another example of the uphill challenge of implementing bold reform is the government initiative to expedite the procedures for budget execution. The State Secretariat started the drafting of the presidential decrees for that reform four months ago, but no information is yet available as to when the reform measures will be announced.
Source: http://www.thejakartapost.com/news/2015/09/03/editorial-red-tape-stifling-business.html