Foreign direct investment in Indonesia continued to grow in the third quarter, rising more than 22 percent, year-on-year, to Rp 56.6 trillion ($5.9 billion). As economies continue to slow in the United States and Europe, some experts predict that trend to continue.

But despite the positive economic outlook, Indonesia remains a very difficult place to do business. Legal and regulatory uncertainties prevail. As one government official recently stated, the only guarantee for an investor here is that there will be problems, a view supported by the World Bank's recently released "Ease of Doing Business" report.

This report ranks 185 countries across a number of key areas important to investors, including the ease of starting a new business, registering property, getting electricity, paying taxes and obtaining construction permits. The report also measures how well contracts are respected and enforced and the degree to which investors are protected.

The Indonesian government set an ambitious goal to become an advanced economy by 2025. If it is to achieve that goal, it needs to evolve its manufacturing beyond domestic consumption, and start exporting raw commodities and materials. It needs to move up the value chain and become a global player in manufacturing high-value exports. Protectionist policies will not achieve that goal. Improving the business environment here will.

As it strives to move up the export value chain, Indonesia will increasingly be engaged in fierce competition with its neighbors for the same investment dollars. This is why the report is a valuable barometer of future potential FDI. It allows Indonesia to measure its performance against other countries in the competition for investment dollars, and it also measures many of the key factors that drive investors' decisions.

Unfortunately, there is very little good news in the report, especially where Indonesia is concerned. While the country improved its overall ranking by two points in 2013, moving from 130th to 128th, the country now ranks just below Ethiopia and just ahead of Bangladesh in the global ranking. It continues to lag far behind most of its Southeast Asian neighbors. Singapore is in first place globally, Thailand is at No. 18, Malaysia is at 12, and Vietnam ranks 99th.

Contract enforcement and investor protection have received significant media attention during the past year, fueled in part by the government's uncertain stance in regards to investment in the mining, oil and gas sectors, and most recently by the targeting of Chevron and the detaining four of its Indonesian employees in a bioremediation cost-recovery dispute.

Therefore, it doesn't come as a big surprise that Indonesia continues to lag behind in the area of contract enforcement, with a ranking of 144th (tied with Malawi), and again, far below its Southeast Asian neighbors. In the area of investor protection, Indonesia dropped three places to 49th this year, and continues to provide significantly less protection than Singapore, Malaysia and Thailand, which rank 2nd, 4th and 13th respectively.

One bright spot in the report is in the area of electricity supply, where Indonesia moved up 11 places. But even this improvement is qualified by the fact that Indonesia remains in the last quartile globally in terms of electricity supply with a rank of 147.

Not surprisingly, it continues to take an enormous amount of time to start a business here and the situation is getting worse. On average, it takes 47 days to start a new business in Indonesia, versus 36 days in the Philippines, 34 days in Vietnam, 29 days in Thailand, six days in Malaysia and just three days in Singapore. More alarming is that Indonesia has dropped five places, to 166th globally, in this category and now ranks between Swaziland and Niger.

Recognizing the problems investors face in starting new businesses, the new head of Indonesia's Investment Coordinating Board (BKPM), Chatib Basri, recently announced a program that will allow companies in Jakarta that apply to the BKPM for business and investment licenses to do so online. The new system announced will allow applicants to track the approval process, and require the BKPM to issue approvals within 14 days of receiving an application, or be more responsive when delays occur.

BKPM's decision to set up an online approval system, increase transparency and reduce the approval bureaucracy within its own department may seem like a small step, given the wider problems that businesses face here. In some ways it is. But great things come from small beginnings. Removing the obstacles to establishing new businesses is the surest way to promote investment and increase Indonesia's relative competitiveness. By demanding that his own department speed up the process of approving business licenses, and measuring improvement against that goal, Chatib is walking the talk and setting the right example for other agencies and ministries to follow.

[Andrew White is the managing director of the American Chamber of Commerce in Indonesia.]