Start-up time for businesses in RI among highest in Asia

Urip Hudiono, The Jakarta Post, Jakarta

Another survey -- this time from the World Bank -- has confirmed that starting a business in Indonesia has become more difficult due to additional red tape, despite the country having improved its overall business and investment climate.

In its "Doing Business 2008" global survey published Wednesday, the World Bank found the time needed to set up shop in Indonesia has now increased to 105 days from 97 last year, as a result of a miscalculation by the government in its efforts to circumvent bureaucracy by delegating businesses licensing authority to the Justice Ministry's provincial offices.

A recent survey from the University of Indonesia's Economic Research Center (LPEM-UI) produced a similar result, with the process slowing to 86 days from 80 previously.

Starting a business in Indonesia requires a total of 12 procedures, and has one of the highest minimum capital requirements.

This compares with only 11 procedures within 50 days in Vietnam, 8 within 33 in Thailand, 9 within 24 in Malaysia, and 5 within 5 in Singapore -- which, according to the survey, is also the world's best place to do business. None of these countries require a minimum capital requirement.

During a presentation on the LPEM-UI survey findings Tuesday, State Minister for Administrative Reform Taufiq Effendi said that the Justice Ministry had restored all business licensing authority to Jakarta.

He also said the government would continue to implement its package of reforms to improve the investment climate, and hoped to reduce the business start-up time to 25 days.

Apart from having among the most complicated business start-up procedures in the Asian region, the World Bank's annual survey also shows that Indonesia still makes investors think twice when confronted with such issues as labor, infrastructure, financial access and land procurement.

The good news from the World Bank is that Indonesia has steadily improved its business environment, rising to 123rd out of the 178 countries surveyed, up from 135th last year.

Notable reforms include simpler construction licensing procedures, improved investor protection through market disclosure rules, better management of credit information by the central bank, and improved macroeconomic stability.

The World Bank's representative in Indonesia, Joachim von Amsberg, said further reforms could well lift the country out of the lowest quartile of countries.

To further improve the business start-up situation, the World Bank's lead financial economist for Indonesia, S.P. Srinivas, suggested the implementation of more "one-stop service offices" and the "parallel processing of licenses".

In terms of the minimum capital requirement for a business start-up, Srinivas lamented the fact that Indonesia's new Corporations Law doubles the amount required to Rp 50 million (US$5,000), thus discouraging small businesses from contributing to the formal economy.

The World Bank also suggested that Indonesia quickly enact its new tax laws, a new mining law providing for clearer contractual systems, a cyberlaw to support paperless procedures, and the necessary ancillary regulations for the newly enacted Investment Law.
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