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Major overhaul to ease business
A former furniture businessman, President Joko “Jokowi” Widodo knows first hand how complicated it is to set up a business in Indonesia — starting up can take months through the dozens of costly procedures
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A former furniture businessman, President Joko “Jokowi” Widodo knows first hand how complicated it is to set up a business in Indonesia — starting up can take months through the dozens of costly procedures.
Hence, the government is scrapping many procedures and saving both time and money to start a business in its 12th economic stimulus package that centers on the nation’s ease of doing business.
Beyond that, by July this year, the President has also pledged to scrap 3,000 regional government regulations (Perda) that have made it much more complicated for businesses to set up and operate.
The mission is ambitious. Jokowi, who is a former Surakarta mayor, wants Indonesia to rank at least 40th among 189 economies surveyed in the 2017 World Bank’s Doing Business report, a significant jump from 109th in 2016 and 120th in 2015.
“We want all business sectors to be competitive,” the President told journalists gathered at the State Palace on Thursday when announcing the 12th policy package since September.
“Whether or not we are being surveyed, deregulation is the right thing to do to be able to compete,” he said. Indonesia’s Doing Business rank lags behind neighboring countries Singapore (first), Malaysia (18th), Thailand (49th) and Vietnam (90th).
The survey has become a parameter for investors around the world to determine the ease of doing business in a country, and covers 10 factors such as: starting a business, dealing with construction permits, registering property, paying taxes, accessing credit, getting electricity and trading across borders.
In total, the deregulation package has seen 94 procedures cut by almost half to 49. The time spent on procedures dropped from 1,566 days to 132 days. Costs have also dropped from Rp 92.8 million (US$7,036.10) to Rp 72.7 million, among others.
“It’s a headache to look at the procedures. But I had been there and done that,” said Jokowi, shaking his head in disappointment. “This is why the 12th package is very important for micro, small and medium enterprises — simplifying procedures, cutting down costs and speeding up processes.”
Coordinating Economic Minister Darmin Nasution gave an example of how inefficient starting a business can be.
Securing a company name can take four days for Rp 200,000 and payment for non-tax revenue (PNBP) can take a day for Rp 1 million. Now they can all be streamlined and done online for two working days for a total of Rp 200,000.
“That’s just one example. The others are much more complicated,” said Darmin.
Investment Coordinating Board (BKPM) chairman Franky Sibarani, who is also a prominent businessman, said the deregulation package would benefit micro, small and medium businesses (MSMEs), which have assets of between Rp 50 million and Rp 500 million.
Investment data has shown encouraging signs in response to the government’s past economic stimulus packages, which are driving industrialization, local MSMEs and cutting red tape for investments as part of structural reform in the Jokowi administration.
Total direct investment reached Rp 124.6 trillion in the first quarter of this year, up 17.6 percent from the same period last year. Domestic investments grew higher than foreign investments, with the manufacturing industry dominating 69 percent of the overall investment figure.
The Indonesian Employers Association (Apindo) has warmly welcomed the government’s deregulation package. “MSMEs will get the most benefits of the deregulation,” Apindo chairman Hariyadi Sukamdani said.
The business group especially appreciates the government’s plan to scrap thousands of regional bylaws (Perda) that are deemed counterproductive and not essential to regions’ business activities.
“Perda is the culprit,” he said, expressing the frustration of business players when it comes to the many provincial government regulations that sometimes hinder investment.
As the President put it, setting up a business should be encouraged, not be ruwet, a Javanese term that means “very complicated”.
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