Jayanty Nada Shofa, Jakarta – Companies tend to spend the most money when doing business in Indonesia compared to other ASEAN-5 countries, according to the Indonesian Employers Association (Apindo).
The ASEAN-5 refers to Malaysia, the Philippines, Thailand, Vietnam, and Indonesia, Apindo data shows.
The association revealed Tuesday that Indonesia fell under the high-cost economy category, making it less competitive in the ASEAN-5 region.
"The problem that persists in our country is that Indonesia is a high-cost economy. ... Indonesia holds the highest costs for logistics, energy, labor, and loans among the ASEAN-5 countries," Apindo chairwoman Shinta Kamdani told a forum in Jakarta.
According to Apindo, Indonesia's minimum wage stands at $329 per month, above ASEAN-5's average of $302. Malaysia and the Philippines have the same $329 minimum wage, while Thailand's reaches $313. Vietnam has the lowest minimum wage at $209. The lending rate in Indonesia ranges between 8 and 14 percent, higher than the average of 4-6 percent.
Indonesia's trade logistics costs also hit 23.5 percent of the country's gross domestic product (GDP), much higher compared to Malaysia's 13 percent and Singapore's 8 percent. Shinta added: "Although Bappenas [National Development Planning Agency] claimed that Indonesia's logistics costs had dropped to 14 percent of GDP, Indonesia's LPI [logistics performance index] in 2023 says otherwise."
As the name suggests, the LPI scores a country's trade logistics performance on a 5-point scale, while taking into account factors such as timeliness and logistics competence, to name a few. Indonesia placed 61st out of 139 countries after earning an overall score of 3. The 2023 index gave Malaysia a 3.6 in overall score, while Thailand got 3.5. Both Vietnam and the Philippines scored 3.3 in LPI.
From a cost standpoint, Indonesia is the most competitive when it comes to exports. It only costs businesses $211 to export goods from Indonesia. However, it usually takes 56 hours to export, way longer than the average 45 hours in the ASEAN-5. Importing time in Indonesia is around 106 hours, almost double the average time in ASEAN-5 (58 hours). Indonesia's import costs are also the most expensive in the ASEAN-5, reaching $164 compared to the average of $104.
"It's funny to see that it is the most expensive to import goods into Indonesia [compared to other ASEAN-5 countries]. Indonesia also takes the longest time to import. So businesses have difficulties in importing the necessary raw materials," Shinta said.
Source: https://jakartaglobe.id/business/indonesia-has-highest-costs-of-doing-business-in-asean