The FINANCIAL — Indonesia continued a strong pace of reforms to improve its investment climate, says the World Bank Group’s latest Doing Business 2018: Reforming to Create Jobs report.
Indonesia has made significant progress in several areas measured by Doing Business, and the country is amongst the world’s top 10 reformers, with 39 reforms related to the indicators included in Doing Business adopted in 15 years. More than half of these reforms have been implemented in the last four years. For a second consecutive year, Indonesia carried out seven reforms, the highest single-year count for the country. In this year’s ease of doing business global rankings, the country moved up to 72nd place.
“Indonesia has accelerated the pace of reforms in recent years and its efforts are paying back. We commend the government’s continued determination to improve the business environment in the country. Continuation of the reform momentum, and a widening of the reform effort to include openness and competition reforms, is key to further stimulate the country’s private sector,” said Rodrigo A. Chaves, Country Director for Indonesia.
The reforms implemented in the past year in Jakarta and Surabaya, the two cities covered by the report, are:
Starting a business was made less costly with a reduction in business start-up fees to 10.9 percent of income per capita, from 19.4 percent.
Getting electricity was made less costly by reducing connection and internal wiring certification fees. The cost to obtain an electricity connection is now 276 percent of income per capita, down from 357 percent. In Jakarta, getting electricity was also made easier by streamlining the processing of applications for new connections.
Access to credit was improved with the establishment of a new credit bureau.
Trading across borders was facilitated by improving an electronic billing system for tax, customs and excise as well as non-tax revenue. As a result, the time for obtaining, preparing, processing, presenting and submitting documents when importing decreased from 133 hours to 119 hours.
Registering property was made less costly by a reduction of transfer tax, reducing the total cost from 10.8 percent to 8.3 percent of the property value.
Minority shareholder rights were strengthened by increasing minority shareholder rights, their role in major corporate decisions, and enhancing corporate transparency.
In the last 15 years, the country has reformed the most in Starting a Business, with eight reforms since 2003. As a result, starting a new business in Jakarta now takes 22 days, compared with 181 days in Doing Business 2004. However, the number of procedures to register a new business remains high, at 11 procedures, compared with five procedures in high-income OECD economies.
Indonesia has also made significant improvements in Resolving Insolvency, an area in which the country performs best. In 2003, the recovery rate was only 9.9 cents on the dollar. This has jumped significantly to 65 cents today.
Indonesia still needs to improve in the area of Enforcing Contracts. While the cost for resolving a commercial dispute through a local first-instance court in Jakarta has almost halved from 135.3 percent of the claim in 2003 to 74 percent now, it is still much higher than the average cost of 21.5 percent in the OECD high-income economies.