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The Jakarta Post
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Regions still face obstacles in attracting businesses: Survey

  • Linda Yulisman

    The Jakarta Post

Jakarta | Sat, September 3 2011 | 08:00 am

A recent nationwide survey concluded that deficient infrastructure, overlapping regulations and poor licensing services remain the major hurdles obstructing business development at the local level across Indonesia.

Asia Foundation director for local and economic governance, Erman A. Rahman, said that according to a large number of survey respondents, infrastructure, a key factor in local and economic governance, was still the main bottleneck faced by business people at the local level.

“There is a high disparity in the quality of infrastructure between most developed and relatively less developed regions. In general, more developed regions have better infrastructure, such as roads, electricity, clean water and telephone connectivity,” he said during a recent discussion on the local economic governance survey held this year by the Asia Foundation and the Regional Autonomy Watch (KPPOD).

The survey, which covered 19 provinces and 245 regencies and municipalities, with 50 business people interviewed in each location, also showed that the main problems associated with infrastructure were related to the excessive duration of time required to repair damaged facilities, such as an average of 75 days to repair damaged roads and up to seven days to repair ailing water and electricity networks and telephone connections.

Erman added that another recent survey conducted by the Asia Foundation and the Indonesian Forum for Budget Transparency (FITRA) found that failing infrastructure was also caused by poor maintenance allocation in regional budgets. Average local spending for roads and bridge maintenance, for example, covered only one-fourth of the total budget required for adequate maintenance for a period lasting up to five years.

The local economic governance survey also reported that overlapping regulations resulted in high transaction costs, such as transportation expenses for essential goods.

“Based on our review, 72 percent of overlapping regulations do not have the latest legal references and 17 percent of them result in negative economic impacts. Many overlapping local regulations have created more problems for business people,” Erman said.

He added that around 77 percent of respondents acknowledged that they paid illegal charges for distribution of goods.

This finding, Erman said, was in line with another survey by the foundation and University of Indonesia’s Institute for Economic and Social Research (LPEM-UI), which showed that legal and illegal road charges, shady security payments and route license fees had pushed up real vehicle operational costs by around 14.5 percent.

According to Erman, another major business obstacle was poorly-implemented licensing services, in spite of positive perceptions by the majority of respondents.

“Three out of four businessmen surveyed consider licensing services efficient, transparent and free from illegal charges. However, the time taken for obtaining the licenses is still very long,” he said, referring to the issuance of a company license, which took 11 days on average rather than the three days stipulated within the ministerial regulation.

Erman added that the excessively long period required to obtain various business licenses had made business players reluctant to even attempt to process them, with, for example, only half of the overall respondents claiming to hold their essential legitimate company licenses.

A recent survey on the centers for one-stop integrated license services (PSTP), aimed at enhancing the business climate within Southeast Asia’s largest economy, said that within many local administrations, the centers had yet to run effectively.


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