Dzulfiqar Fathur Rahman, Jakarta – British investors in Indonesia say running businesses in the country has become easier in some ways following the enactment of the Job Creation Law, but bureaucratic inefficiencies can still pose a challenge.
British Chamber of Commerce in Indonesia (BritCham) chairman Olly Riches said United Kingdom-based companies operating in Indonesia had reported improvements in investment processes based on the omnibus law that overhauled nearly 80 laws and simplified licensing procedures.
However, foreign companies looking to enter Indonesia had not reported the same experience, in part because it was still too early to tell, according to Riches.
"It is not easy to interpret [the legal framework] if you are not based in Indonesia or you do not have somebody who is familiar with the new regulations," Riches said in an online discussion held by The Jakarta Post on Thursday.
As one of the changes brought about by the jobs law, the government introduced in August a new version of its unified business licensing platform, called the online single submission (OSS) system, which integrates the procedures from various ministries and regional agencies and shortens the overall timeline through the use of a risk-based approach.
However, bureaucratic inefficiencies remained the key challenge for some businesses to operate in Indonesia, according to Riches, who cited data from the joint European chambers' business confidence index last year. Corruption, the regulatory environment and labor policies also emerged as particular challenges.
At least five UK-based companies entered Indonesia during the COVID-19 pandemic, including folding bicycle manufacturer Brompton, according to Riches.
In the first six months of this year, realization of direct investment from UK-based companies amounted to US$61.9 million, 25.42 percent lower than in the equivalent period of 2020, Investment Ministry data show.
The government has slashed the number of steps for starting a business to four from 11, according to Indra Darmawan, an expert staff member for macroeconomy at the Investment Ministry. This is estimated to have cut the number of days it takes to register a firm from 10 to 2.5.
"This plan has already been discussed with the World Bank team in Washington, DC, around a month ago, to inform [them] that Indonesia has implemented some reforms regarding the [ease of] doing business. We hope that our ranking will improve from 73rd place to somewhere better, around the 60s' level," said Indra.
The government was also betting on special economic zones (SEZs), free trade zones and industrial districts to lure more investment, according to Indra. There are 15 SEZs with a total area of 17,403 hectares and 118 industrial districts covering a total area of 51,861 ha.
The government has announced a target of attracting a total of Rp 22.2 trillion ($1.56 billion) in investment to two SEZs in Batam, Riau Islands, by 2040. They are focused on the digital economy and on maintenance, repair and overhaul services for aircraft, according to Batam Development Authority (BP Batam) center of strategic planning head Fesly Abadi Paranoan. These two SEZs are predicted to provide employment for 26,476 people.
Fesly added that BP Batam was also planning to develop two more SEZs, one focusing on health care in Sekupang district and the other on aircraft maintenance near Hang Nadim International Airport.
"SEZs offer benefits on several fronts, such as taxation, customs, excise, goods traffic, labor, immigration, land issues and spatial planning," said Fesly. "These benefits make the licensing processes easier and faster and thereby draw new investment."